■..-: 


From  the  HON.  HORACE  GREELEY. 

New  York,  Ma)-  5,  1870. 
Dear  Sir: 

I  have  jours. of  the  27th  ult. 

I  think  you   have  struck  upon  a  great  truth — 

or  at  least   a   corner  of  it.      I   am   not   sure   that 

your   plan    has   all    the    elements   of   success — am 

quite  confident  it  has  some  of  them.     Let  us  study 

and  ponder  until  the  whole  truth  shall  be  clearly 

manifest. 

Yours, 

HORACE  GREELEY. 
W.  B.  Partee,  Esq. 


THE 


SCIENCE   OF  MONEY 


A   GEEAT   TRUTH. 


GOLD   LEGAL  TENDER,  BILLS   OF   EXCHANGE,  EXPORTS 
AND    IMPORTS,  BALANCE    OF    TRADE,  FAVOR- 
ABLE  OR   UNFAVORABLE   BALANCE 
OF    EXCHANGE. 


ALL  SIMPLIFIED  AND  MADE  CLEARLY  MANIFEST. 


BY 


•NOMISTAKE. 


>  i  >   .  .  . 

PHILADELPHIA: 

J.    B.    LIPPINCOTT    &    CO. 

1871. 


Entered  according  to  Act  of  Congress,  in  the  year  1870,  by 

J.   B.   LIPPINCOTT    &    CO., 
In  the  Office  of  the  Librarian  of  Congress  at  Washington. 


•   ■  .  ■    ■  .  < 


■  .    , 


i5  4 


TO 
THE   MEMORY   OF  THE   LATE 

JAMES   DICK, 

THE  PRINCE   OF  NEW   ORLEANS   MERCHANTS, 

WHOSE   HONOR   AND   INTEGRITY 

GAVE   HIM  FRIENDS   IN  THE   HOUR   OF  NEED, 

ENABLING  HIM   TO   SAVE   FROM   THE   DISASTERS   OF   1837 

AN  HONORABLE   NAME, 

AND   THE   MEANS   OF  DOING   MUCH   GOOD 

TO   FRIENDS   AND   RELATIONS, 


if 


his   humble    iNork, 


4 


OF   ONE  WHO   SHARED   HIS   GAINS 

AND   ENDEAVORED  TO  PROFIT  BY   HIS  COUNSELS, 

18   RESPECTFULLY  DEDICATED 

BY 

THE   AUTHOR. 


389260 


IE"TEODUOTIOE". 


In  offering  the  following  reflections  deduced  from 
observations  on  the  circulating  medium  and  ex- 
changes of  our  country,  together  with  the  central 
idea  of  a  divorcement  of  money  of  account  from 
all  articles  of  merchandise,  I  am  well  aware  of  the 
opposition  I  will  have  to  encounter  from  the  long- 
standing prejudices  in  favor  of  gold  as  a  legal  tender 
and  circulating  medium.  I  only  ask  a  patient  and 
thoughtful  perusal  of  my  arguments,  assuring  the 
reader  that  in  pointing  out  a  sure  road  to  the  liqui- 
dation of  our  large  and  onerous  debt,  I  do  not  offer 
it  as  a  clap-trap  to  gain  advocates.  The  whole  is 
only  secondary  to  the  inauguration  of  a  permanent 
leo-al  tender  which  will  not  be  an  article  of  merchan- 
dise. 

I  did  not  undertake  this  investigation  with  any 
reference  to  our  national  debt,  but  solely  with  the 
hope  of  giving  to  the  country  a  cheaper  medium  in 
effecting  her  internal  exchanges.  The  subject  is  so 
fruitful  of  thought,  leading  one,  as  it  were,  through 
all  the  field  of  political  economy,  that  I  deem  it  ad- 
visable, in  the  present  agitated  state  of  our  finances, 
to  pursue  it  in  connection  with  the  liquidation  of 
our   debt,    especially   as   no  opportunity  could   be 

(vii) 


viii  INTR  OD  UCTION. 

more  favorable  for  the  demonstration  of  the  prin- 
ciple I  have  undertaken  to  set  up. 

To  insure  the  establishment  of  a  great  principle, 
it  must  be  brought  forward  at  the  proper  time,  when 
the  thoughts  and  feelings  as  well  as  interest  of  all 
parties  can  be  called  into  play. 

This  is  at  present  the  situation  of  the  United 
States.  She  has  a  legal  tender  and  circulating 
medium  of  her  own,  but  still  lives  in_adultery  with 
gold;  and  I  advocate  a  divorce,  that  the  future  off- 
spring may  be  legitimate. 

In  advocating  so  great  a  change  I  am  fully  aware 
"that  there  surely  must  be  some  foundation  for  opin- 
ions so  generally  embraced  by  mankind,  and  that 
we  ourselves  ought  rather  to  call  in  question  the  ob- 
servations and  reasonings  which  overturn  what  has 
been  hitherto  so  uniformly  maintained  and  acqui- 
esced in  by  so  many  individuals,  distinguished  alike 
by  their  wisdom  and  benevolence." 

The  profound  investigations  of  Lardner  retarded, 
but  did  not  arrest,  ocean  steam  navigation ;  skepti- 
cism did  not  deter  Morse  from  giving  to  the  world 
the  telegraph;  nor  did  Washington  falter  to  give  us 
a  republic,  when  all  past  history  condemned  the 
experiment.  It  is  the  hope  that  co-operation  will 
brine  success  to  this  divorcement  that  leads  me 
now  to  lay  it  before  the  country.  As  I  do  not 
promise  to  put  money  in  any  man's  pocket,  other- 
wise than  by  industry  and  economy,  I  trust  I  shall 
not  be  condemned  as  selfish  or  visionary,  but  shall 
be  regarded  as  making  an  honest  effort  to  accom- 
plish good. 


INTR  OD  UCTION.  \  x 

The  following  are  the  points  I  have  endeavored 
to  establish : 

If  the  legal  tender  and  circulating  medium  of  a 
country  be  at  times  desirable  for  export,  it  will 
become  a  curse  to  the  people  instead  of  a  blessing. 

Production  in  excess  of  consumption  will  alone 
enable  a  people  to  pay  taxes. 

ISTo  country  can  have  credit  long  without  surplus 
productions,  this  being  the  basis  of  all  national 
credit. 

No  country  has  ever  offered  her  capital  stock  in 
payment  of  debt.  To  do  so,  if  it  were  held  by  a 
foreign  power,  would  be  to  surrender  nationality. 

Money  has  no  other  use  than  to  buy  with  or  to 
liquidate  debt. 

Between  countries  money  loses  its  value  as  money 
from  its  peculiar  character,  and  is  only  received  as 
a  commodity  in  exchange. 

It  is  not  the  export  or  import  of  any  one  article 
that  impoverishes  a  nation  or  replenishes  its  wealth. 
It  is  the  difference  in  gain  or  loss  by  the  exchange. 

Productions  command  productions ;  the  medium 
to  effect  the  exchange  is  conventional,  and  may  have 
no  other  value. 

The  merchant  creates  the  demand,  without  which 
production  for  sale  must  cease. 

The  incentive  to  production  is  consumption  or  to 
sell,  the  object  of  which  is  to  buy  and  gratify  desires. 

There  would  be  no  selling  if  it  did  not  give  ability 
to  buy.  Selling  enables  you  to  buy,  and  stimulates 
production. 

Digestion  limits  the  desire  for  food  ;  luxuries  have 


x  INTR  OD  UCTION. 

no  bounds.  Capital  cannot  be  used  in  the  former 
bevoud  gratification  ;  in  the  latter  it  has  no  limits. 

If  all  men  were  misers,  there  would  be  no  pro- 
duction. 

All  produce  gravitates  to  the  point  where  it  is 
most  in  demand,  and  that  point  is  where  there  is 
greatest  ability  to  buy. 

Merchants  cannot  become  opulent  if  production 
is  but  little  over  consumption. 

Gold  is  not  the  circulating  medium  between  coun- 
tries,— it  is  bills  of  exchange;  and  gold  becomes 
merchandise. 

A  full  investigation  of  this  subject  is  invited,  and 
I  beg  that  all  strictures  and  criticisms  be  forwarded 
to  me  at  Vicksburg,  Mississippi. 

NOMISTAKE. 


CONTENTS. 


PAGE 

Gold  Legal  Tender 13 

Fluctuations — their  Effect        .......     43 

Bills  of  Exchange — Modern  Use 57 

Balance  of  Trade 64 

Application 66 

Consolation       ..........     70 

Legal  Tender    .         .         . 71 

Who  pays  the  Expense  and  Charges  of  a  Medium  .         .         .74 
Instinct     ...........     82 

Gold  Legal  Tender  and  Circulating  Medium  .         .         .         .85 

Legal  Tender 97 

Divorcement  of  Gold  from  Circulating  Medium     .         .         .  100 
Production  and  Consumption  .  .         ...         .         .         .  104 

Credit  through  Circulating  Notes 114 

Medium  should  be  Legal  Tender 117 

Legal  Tender  only  to  be  issued  for  Bonds         .         .         .         .129 
Trial  and  Summary  ........  134 

Production  and  its  Drawbacks 145 

Circulating  Medium  and  Legal  Tender   .....  149 

Production  and  Circulating  Medium 155 

Circulating  Medium  a  Necessity 157 

Legal  Tender,  Balance  of  Trade,  Cotton  Crop,  etc.         .         .  160 
"Favorable  or  Unfavorable  Balance  of  Exchange" — What 

it  means         ..........  171 

Legal-Tender  Circulating  Notes  not  made  Legal  Tender,  a 

Curse  to  Production      .         .         .         .         .         .         .         .176 

Debt,  Interest,  and  Legal  Tender 181 

Medium  of  Exchange       ........  187 

Exchange  and  Medium    ........  198 

True  Basis  of  all  Mediums 202 

Deductions .        .         .212 

(x\) 


SCIENCE    OF   MONEY. 


GOLD  LEGAL  TENDEK. 

The  currency  of  a  country,  based  on  land  or  prop- 
erty as  a  measure  of  value,  will  depreciate  the 
moment  the  income  or  annual  rent  falls  short  of  the 
average  of  production.  But  if  income  be  its  basis, 
and  likewise  be  the  measure  of  value,  the  depreci- 
ation can  never  be  so  great  as  to  absorb  all  value; 
it  is  this  error  in  the  issue  of  an  inconvertible  cur- 
rency or  medium  of  exchange  that  produces  all  the 
losses  and  troubles  to  individuals  or  a  government. 
Consequently  it  is  quite  different  if  the  income  be 
fixed  and  certain;  but  allow  any  other  standard  to 
measure  the  value  of  property  or  its  availability, 
and  you  subject  it  to  the  whims  of  the  speculators 
or  the  demands  of  the  fortunate  holders  of  the 
standard  or  measure  of  value.  This  error  in  esti- 
mates or  foundation  of  value  cannot  but  be  tem- 
porary if  based  on  annual  income,  this  being  a 
reserve  over  immediate  consumption  ;  if  we  confine 
our  estimates  to  income  or  production  alone,  many 
fluctuations  will  be  avoided. 

The  medium  of  exchange,  or  the  circulating  me- 
dium, of  a  country,  has  no  effect  or  value  in  the 
exchange  between  countries ;  the  supply,  of  wbat- 

2  (13) 


14  SCIENCE   OF  MONEY. 

ever  it  may  be,  adjusts  itself  to  the  demand,  and 
leaves  the  trade  or  exchanges  of  the  two  countries 
precisely  in  the  same  condition  as  if  they  were  bar- 
tering one  commodity  for  the  other.  An  increase 
or  diminution  of  the  medium  of  exchange  in  any 
one  of  the  countries  affects  only  itself,  and  not  the 
exchangeable  value  of  the  commodities  the  one 
country  desires  to  barter  with  the  other :  hence  the 
conclusion  which  cannot  be  altered  by  the  quantity 
of  the  medium.  The  result,  after  all,  is  but  the  ex- 
change or  barter  of  the  one  surplus  for  the  other. 
He  who  has  the  power  to  buy  or  a  surplus  to  ex- 
change is  in  a  better  condition  than  the  party  who  has 
no  surplus ;  the  former  can  supply  all  his  wants,  the 
latter  must  be  pinched  and  restricted,  and  may  com- 
plain of  hard  times.  The  one  who  has  not  the 
wherewithal  to  supply  his  wants  will  forever  re- 
main in  the  same  condition  and  be  complaining. 
The  depreciation  of  a  currency  does  not  affect  the 
foreign  trade  or  have  any  influence  over  the  demand 
and  supply,  each  retaining  its  relative  value  in  ex- 
change. 

The  change  of  a  circulating  medium  affects  value 
only  at  the  beginning  and  the  end.  The  United 
States  has  destroyed  all  the  values  in  her  power  by 
the  change,  and  it  now  remains  to  be  seen  in  what 
way  she  may  continue  the  existence  of  legal  tenders. 
If  the  government  be  prudent,  wise,  and  economical 
in  the  future,  and  shall  never  at  any  time  allow  issu- 
ance, or  force  others  on  the  market,  except  in  ex- 
change for  bonds,  the  legal  tenders  must  continue  to 
carry  the  same  value  of  a  four  per  cent,  gold-bearing 


GOLD   LEGAL    TENDER.  15 

bond.  The  fluctuations  from  this  center  can  only  be 
such  as  are  incident  to  supply  and  demand,  the  excess 
or  shortness  being  only  to  the  extent  of  a  temptation 
being  offered  in  rates  of  interest  to  cause  the  conver- 
sion of  bonds  into  legal  tenders,  and  vice  versa. 

We  will  suppose  a  case  or  position  of  trade  where 
the  legal  tender,  as  a  circulating  medium,  is  not 
equal  to  its  wants,  and  no  one  in  the  country  has 
bonds  to  convert  and  supply  the  deficiency.  Imme- 
diately the  price  of  bonds  would  rise  in  the  market, 
and  cause  their  importation,  like  any  other  com- 
modity or  value  in  exchange  for  an}-  surplus  pro- 
duction we  may  have.  This  will  continue  until  an 
equilibrium  or  equation  of  supply  and  demand  is 
established.  Even  should  the  premium  paid  seem 
excessive,  the  circulating  medium  must  and  will  be 
supplied  so  long  as  there  remains  in  the  country  a 
surplus  of  value  from  which  speculators  can  hope  to 
gain  a  profit  from  their  exchange ;  and  when  this 
state  of  the  market  does  occur, — and  sooner  or  later 
it  will, — then  legal  tenders  may  claim  a  premium 
over  gold  or  at  par.  This,  in  commercial  parlance, 
is  a  resumption  of  specie  payment.  When  it  does 
come  thus,  it  is  more  likely  to  continue  than  when 
brought  about  by  financial  arrangement  or  tempo- 
rary expedient. 

There  need  be  no  fears  in  regard  to  a  supply  of 
gold,  as  all  commodities  tend  to  the  most  profitable 
market,  and  that  market  will  be  found  where  there 
is  the  greatest  abundance  of  produce  to  sell  or  ex- 
change. Those  who  have  the  ability  to  buy  can 
always  supply  their  wants. 


16  SCIENCE  OF  MONEY. 

It  is  certainly  an  object  with  any  country  having 
a  specie  circulating  medium  to  desire  as  large  a  sum 
as  possible  for  her  exports  to  be  returned  in  coin ; 
hence  the  general  anxiety  of  all  parties  to  see  a  con- 
stant stream  of  bullion  flowing  into  their  country. 
This  is  natural,  as  the  tendency  is  to  cheapen  money 
and  advance  the  price  or  value  of  all  other  commo- 
dities. They  do  not  consider  that  they  have  gained 
nothing  in  wealth,  but  have  only  changed  the  relative 
value  or  exchangeable  value  of  commodities.  It 
may  be  they  have  exchanged  an  article  much  needed 
for  reproduction  for  one  that  is  of  no  value  until  ex- 
changed for  something  else.  It  is  but  the  hoarding 
of  a  value  that  could  have  been  made  profitable ;  con- 
sequently, so  long  as  it  remains  idle,  the  income,  to 
the  full  extent  of  the  average  profits  of  the  coun- 
try, is  lost,  not  only  to  the  individual,  but  to  the 
country,  and  the  inference  is  that  the  country  ex- 
changing the  gold  has  realized  the  profit  due  to  the 
producer. 

The  prosperity  of  a  country  depends  more  on 
moderate  profits  and  uniform  prices  than  on  the 
extreme  fluctuations  incident  to  speculation.  The 
latter  tend  to  discourage  production  and  industry — 
the  majority  of  producers  favoring  the  occupation 
least  fluctuating.  The  prudent,  plodding  class  desire 
that  the  money  rate  of  interest  should  indicate  the 
rate  of  profit,  instead  of  the  embarrassment  growing 
out  of  extreme  speculation,  when  the  current  inter- 
est demanded  for  the  use  of  capital  in  productive 
enterprise  is  the  measure  of  profit  realized.  No 
great  losses  can  flow  from  the  lending  or  borrowing 


GOLD  LEGAL    TENDER.  17 

of  it,  if  limited  to  time  in  the  permanency  of  the 
investment.  It  is  the  sudden  fluctuations  either  in 
interest  or  of  production  that  tend  to  discourage 
reproduction  from  the  annual  accumulation  of  en- 
ergy and  economy. 

In  the  divorcement  of  the  circulating  medium  of 
a  country  from  all  articles  of  merchandise  in  which 
foreign  trade  can  participate,  you  have  at  once  con- 
fined the  fluctuations  to  the  home  demand,  and  it  is 
but  reasonable  to  credit  the  producer  with  ability  to 
measure  his  own  wants,  and  to  assume  that  he  will, 
in  parting  with  his  surplus,  demand  in  exchange 
just  such  goods,  wares,  and  gold  as  may  be  most 
suitable  to  his  future  desires.  The  agriculturists  of 
a  country  are  not  so  conversant  with  the  supplies  of 
other  markets  as  are  the  merchants  and  traders, — 
hence  the  farmer  will  advise  with  the  trader  as  to 
the  time  and  place  for  effecting  the  exchange,  but 
not  as  to  the  particular  articles  needed  by  him  in 
the  future.  ISTo  one  can  tell  what  quantity  of  legal 
tenders,  mess-pork,  flour,  or  clothing  is  needed  so 
well  as  the  one  whose  surplus  is  to  be  exchanged  for 
them. 

However  you  may  arrange,  or  even  multiply  and 
mix  up,  money  with  produce,  after  all,  the  former 
is  but  the  medium  by  which  the  exchange  is  effected; 
the  latter  is  the  purchase,  and  the  result  is  pro- 
duce for  produce.  Now,  this  being  universally  the 
modus  operandi,  and  considered  as  the  end  and  pur- 
pose of  production,  why  should  I  be  required  to 
value  my  property  in  comparison  with  a  commodity 

influenced  by  all  the  speculations  and  complications 

2* 


18  SCIENCE   OF  MONEY. 

of  the  world  ?  And,  after  all,  the  result  is  only  an 
exchange  of  mess-pork  for  flour, — the  demand  for 
gold  to  purchase  tea  in  China,  or  for  silver  to  be  given 
for  wines  and  silks  of  France.  It  matters  not  how 
much  of  the  precious  metal  may  be  demanded  for 
the  speculation,  the  interior  exchange  of  the  country 
should  not,  and  need  not,  be  involved  in  the  pertur- 
bations of  so  uncertain  an  agency. 

When  I  go  to  market  with  my  pork,  I  do  not  wish 
to  be  compelled  to  sell  it  for  a  commodity  or  medium 
that  may  be  in  France  or  China,  but  for  one  that  is 
local,  and  which,  I  know,  will  be  received  for  flour. 
This  is  what  I  call  common  sense  and  honesty,  and 
the  holding  out  to  industry  and  enterprise  the  great- 
est inducements  to  increased  production,  for  which 
they  may  hope  for  an  equitable  exchange. 

The  merchant  finds  me  a  market  for  my  produce, 
and  brings  in  exchange  the  surplus  of  others  which 
I  need.  Neither  of  us  can  prosper  without  influ- 
encing the  future  of  the  other.  The  gambling  spec- 
ulator adds  nothing  to  society  in  morals  or  wealth, 
but  is  ever  plunging  the  producers  and  traders  into 
misery  and  distress. 

I  do  not  claim  for  this  local  currency  a  complete 
immunity  from  fluctuations  and  occasional  periods  of 
embarrassment.  ~No  human  institution  is  free  from 
change  or  from  foreign  complications  in  effecting  our 
internal  exchanges  with  our  local  medium ;  that  never 
can  be  secured  if  we  continue  the  same  measure  of 
value  in  use  as  a  circulating  medium.  Measure  of 
value  should  be  unchangeable,  not  arbitrary;  we  can 
fix  measure  of  time  and  space,  but  not  of  value. 


GOLD  LEGAL    TENDER.  19 

Alan's  nature  will  affix  values  to  his  own  property 
in  accordance  with  fancy  or  interest, — whether  he  will 
exchange  his  dog,  estimated  at  one  hundred  dollars, 
for  two  fifty-dollar  puppies,  or  for  one;  and  if  he 
should  give  his  obligation  on  time  for  a  gun,  it  is  rea- 
sonable to  suppose  he  will  be  as  desirous  afterwards 
to  confine  to  the  country  the  legal  tenders  for  the  one 
as  that  there  will  be  game  to  hunt  with  his  dog  and 
gun.  From  his  industry  he  expects  to  produce  the 
flour  or  pork  which  will  command  on  the  spot  the 
legal  tenders  to  make  good  his  maturing  obligations. 
To  sum  up  all  in  a  word,  I  am  in  favor  of  all  men 
issuing  their  obligations  to  be  paid  in  any  com- 
modity they  may  select,  even  in  puppies,  if  this  obli- 
gation should  be  a  legal  tender,  and  the  measure  of 
them  should  be  the  payment  of  four  per  cent,  in- 
terest per  annum  in  gold.  The  fluctuations  cannot 
long  exceed  the  current  rate  of  interest.  And  as 
these  fluctuations  in  value  only  remotely  influence 
the  comparative  value  of  produce,  the  sacrifice 
which  may  become  necessary  in  meeting  maturing 
obligations  will  be  measured  not  by  the  present, 
but  by  the  remote  period  of  the  maturing  bond, 
which  is  the  basis  of  the  legal  tender.  If  this  legal 
tender  were  gold  and  not  in  the  country,  or  near  at 
hand,  the  loss  would  fall  entirely  on  the  present  and 
not  on  the  future. 

However  much  others  may  desire  the  produce  to 
be  exchanged  for  the  legal  tender,  it  is  but  present- 
ing two  problems  for  solution,  in  the  elucidation  of 
one  principle. 

You  might  as  well  attempt  to  establish  bylaw  two 


20  SCIENCE   OF  MONEY. 

legal  tenders,  to  remain,  and  at  all  times  have  equal 
value,  as  to  presume  to  inaugurate  a  measure  of 
value  and  a  circulating  medium  to  be  one  and  the 
same.  The  two,  from  their  nature  and  object,  are 
incompatible.  When  one  goes  up,  the  other  must 
go  down.  Both  are  intended  to  occupy  the  same 
bed, — but  the  one  at  night,  the  other  during  the  day. 
Our  own  country  for  a  long  time  endeavored  to  en- 
force two  standards  of  value,  gold  and  silver,  but 
found  the  laws  of  trade  such  that  no  edict  could 
force  men  to  pay  obligations  otherwise  than  in  the 
cheaper  commodity,  this  remaining  the  legal  tender, 
while  the  other  became  an  article  of  traffic  and  ex- 
port. The  same  result  will,  some  day,  be  deemed 
not  only  practicable  but  advisable,  in  regard  to  fix- 
ing one  legal  tender  and  one  measure  of  value.  It 
is  impossible  to  make  the  two  one  and  the  same, 
and  still  be  just  to  those  who  desire  only  a  medium 
of  exchange,  and  to  those  also  who  wish  to  measure 
values.  It  is  a  well-known  fact,  that  the  transfer  of 
the  precious  metals  from  one  country  to  another 
will  cause  what  is  called  cheap  money  in  the  one, 
and  dear  in  the  other,  and  that  precisely  in  the  ratio 
of  that  obstruction,  in  the  one,  more  of  an  article 
of  production  must  be  given  in  exchange  for  the 
standard  of  value  than  formerly,  in  the  other  less  will 
be  demanded.  This  must  go  on  until  an  equitable 
exchange  of  commodities  and  the  precious  metals 
is  established,  however  disastrous  it  may  be  to  the 
country  in  the  mean  time. 

We  can  have  no  better  illustration  of  the  effect  of 
a  standard  of  value  of  gold  or  of  legal  tenders  for 


GOLD   LEGAL    TENDER.  21 

the  circulating  medium  than  our  own  present  imper- 
fect standard  as  demonstrated  a  few  weeks  ago.  The 
universal  measure  of  value,  gold,  appreciated  twenty- 
five  per  cent,  when  compared  with  legal  tenders, 
and  again  depreciated  twenty-five  per  cent.,  between 
breakfast  and  dinner. 

Suppose  you  had  had  an  obligation  maturing  on  the 
day  of  this  great  gold  bubble,  and  the  measure  of  its 
value  had  been  gold.  Had  you  delayed  payment  until 
near  the  close  of  banking-hours,  it  would  have  cost 
you  one-fourth  of  your  estate  to  liquidate  it.  3NTow, 
is  it  not  clear  that  this  decline  and  advance  had 
no  relation  to  the  value  of  the  commodity  which 
you  received  when  the  obligation  was  entered  into, 
or  to  its  present  exchangeable  value  ?  It  was  the 
speculative  influence  so  often  brought  to  bear  on 
an  article  of  merchandise,  and  its  disasters  ended 
where  they  should  end, — in  the  gold  rooms.  The 
only  effect  on  the  producer  of  the  country  was 
sympathetic,  and  it  is  to  rid  the  country  of  this 
influence  that  I  am  laboring. 

Take  the  reverse  of  this  gold  obligation,  say  that 
your  maturing  obligation  was  payable  in  legal  ten- 
ders, for  which  you  were  called  on  that  day,  the 
enhanced  value  of  these  legal  tenders  could  only 
have  been  the  fluctuation  in  the  market  value  of  the 
bond  on  which  thev  were  raised,  and  this  could  be 
estimated  only  by  the  difference  of  interest  on  the 
advance  or  decline  in  the  standard  or  measure  of 
value,  and  not  on  the  whole  amount.  In  the  former 
case  you  would  have  become  bankrupt, — in  the  lat- 
ter you  could  have  honorably  discharged  your  obli- 


22  SCIENCE   OF  MONEY. 

gation  with  slight  loss  to  yourself  and  none  to  your 
country. 

Many  will  contend  that  if  the  circulating  medium 
be  other  than  the  precious  metals,  it  will  sooner  or 
later  drive  all  the  gold  out  of  the  country.  The  very 
admission  of  this  is  but  an  argument  in  favor  of  a 
cheaper  medium,  it  being  unreasonable  to  suppose 
that  individuals  will  send  oft' or  exchange  their  gold 
for  trifles.  So  far  from  this,  more  often  than  other- 
wise it  is  exchanged  for  something  for  reproduction 
which  can  be  turned  to  profitable  account  in  the 
future. 

From  a  predilection  in  favor  of  gold,  men  often 
part  with  values  they  should  retain,  but  yield  to  the 
temptation  and  the  hope  of  replacing  those  values 
on  more  favorable  terms.  A  party  sending  off  his 
gold  to  procure  something  to  be  placed  in  the  line 
of  reproduction,  furnishes  an  evidence  not  only  of 
thrift,  but  that  he  has  substituted  a  cheaper  medium 
by  which  to  effect  his  internal  exchanges.  And  if 
ever  again  he  is  in  want  of  gold,  the  productions 
which  he  has  in  hand  will  command  all  he  may 
desire.  There  can  be  no  greater  fallacy  than  the 
exploded  idea  that  the  exportation  of  gold  is  any 
more  impoverishing  to  a  country  than  the  exchange 
of  other  commodities,  many  of  which  are  deemed 
more  valuable  and  absolutely  essential  to  repro- 
duction, such  as  food,  clothing,  etc.  These  cannot 
be  dispensed  with,  and  these  alone  can  be  relied 
on  to  command  labor  and  forward  the  simplest 
enterprises. 

To  suppose  that  the  people  of  a  country  will  part 


GOLD   LEGAL   TENDER.  23 

with  their  gold  and  not  receive  in  return  a  substan- 
tial value,  is  to  argue  that  they  need  a  guardian,  and 
the  party  desiring  to  direct  them  must  have  no 
interest  in  the  exchange.  There  can  be  no  safety 
in  the  counsels  of  one  claiming  the  omnipotent 
power  of  a  general  administration  of  the  private 
affairs  of  his  country.  One  of  the  greatest  difficul- 
ties attending  a  circulating  medium  not  convertible 
into  gold  in  times  of  depression  and  panic,  is  to 
know  what  to  do  with  it  in  case  of  suspension. 
And  it  is  this  uncertainty  that  quickens  the  desire 
to  convert,  or,  as  it  is  now  called,  to  realize.  This 
state  of  uncertainty  cannot  attend  United  States 
legal  tenders,  as  the  privilege  of  conversion  at  will 
into  a  four  per  cent,  annuity,  or  bond,  payable  in 
gold,  gives  to  the  holder  this  sure  outlet. 

So  long  as  the  government  maintains  good  faith 
with  her  people  and  the  holders  of  her  funded  and 
circulating  debt,  no  sudden  or  great  derangement 
or  fluctuation  can  be  entailed  on  the  country  gener- 
ally. At  most,  such  derangement  can  be  but  tem- 
porary, aud  as  the  entire  country  will  have  an 
interest  in  the  recovery,  united  effort  will  cause  the 
loss  to  be  small. 

The  general  confidence  and  disposition  to  uphold 
the  standard  are  quite  different  from  any  local  au- 
thority to  issue  circulating  notes.  The  spirit  of 
rivalry  often  does  more  than  extreme  want  to  em- 
barrass and  depress  the  operations  of  individuals. 

Confidence  and  credit  in  commercial  affairs,  but 
more  especially  in  banking,  cover  more  than  three- 
fourths    of    the    transactions    connected    with   the 


24  SCIENCE   OF  MONEY. 

exchange  of  commodities ;  as  an  evidence,  capital 
itself  will  disappear  whenever  confidence  is  with- 
drawn. 

At  this  time,  the  two  hemispheres  are  mourning 
the  loss  of  one  whose  credit  was  equaled  only  by  his 
charities  while  living.  But  a  few  years  ago,  this 
great  philanthropist  had  to  ask  the  Bank  of  Eng- 
land for  the  promise  of  temporary  aid.  No  sooner 
was  it  promised  than  confidence  was  inspired,  not 
only  in  his  immense  assets  but  also  in  the  credits  of 
all  others  in  like  situation.  In  banking  or  exchange- 
dealing,  confidence  is  far  more  profitable  than  capi- 
tal. Any  exchange-dealer  will  tell  you  that  with 
five  hundred  thousand  dollars  he  will  safely  conduct 
a  business  of  twenty  million  dollars,  or  forty  to  one. 
By  confining  the  business  to  the  capital,  not  more 
than  one-tenth  could  be  effected.  This  difference  is 
due  to  the  cheapening  influence  of  credit ;  and  to 
the  full  extent  of  this  saving  is  the  country  furnished 
with  the  means  of  reproduction  and  extended  profit. 
In  all  other  commercial  affairs,  a  business  of  only 
three,  four,  or  five  to  one  cau  be  entered  into  and 
safely  relied  on. 

For  nearly  ten  years  the  country  has  effected  its 
internal  exchanges  with  an  irredeemable,  incon- 
vertible legal-tender  currency.  No  other  ten  years 
will  show  less  fluctuation  in  production,  or  greater 
immunity  from  periodical  embarrassment.  The  in- 
flux and  efflux  of  gold  have  been  constant,  and  equal 
to  the  wants  of  commerce.  At  no  time  has  there 
been  a  dearth.  During  all  this  time  the  internal 
and  external  exchanges  have  been  unprecedentedly 


GOLD  LEGAL    TENDER.  25 

large, — sustaining  a  tax-list  equal  to  the  entire  ex- 
ports of  the  country  before  the  war.  The  harmony 
of  all  this  is  due  to  the  partial  divorcement  of  the 
internal  exchanges  from  gold.  Perfect  this  system, 
—  make  it  perpetual  and  certain,  —  freeing  the 
country  from  man-traps  and  spring-guns,  in  the 
shape  of  resumption  and  repudiation,  and  a  degree 
of  unexampled  prosperity  will  crown  our  country's 
efforts, — efforts  far  surpassing  the  gigantic  struggles 
of  the  past.  To  illustrate  the  effects  of  a  medium 
of  gold  and  one  of  legal  tenders,  suppose  one  dollar 
of  gold  to  represent  the  measure  of  a  day's  work, — 
the  equivalent  of  a  certain  amount  of  mess-pork, 
flour,  etc.  In  order  to  carry  on  reproduction,  I  go 
to  the  capitalist,  Mr.  Gold,  and  borrow  one  hundred 
dollars,  and  use  it  in  the  production  of  cotton.  In 
order  to  simplify,  I  leave  out  rates  of  interest,  profit, 
etc.  It  is  reasonable  to  suppose  that  the  one  hun- 
dred days'  work  will  produce  sufficient  to  relieve 
Mr.  Gold  from  his  advances.  But  when  I  go  to  the 
merchant  with  my  cotton  to  be  exchanged  for  gold, 
I  am  told  by  him  that  it  is  all  in  China,  but  that  he 
has  a  friend,  "  an  unconscionable  dog,"  who  will  give 
him  eight}'-  dollars  for  the  one  hundred  dollars  in 
China.  Being  compelled  to  make  my  promise  good, 
having  no  other  alternative,  I  accept  the  offer.  I 
return  to  Mr.  Gold,  and  find  myself  twenty  dollars 
short*  Rather  than  sacrifice  me  by  taking  my  mule 
and  plow,  he  advises  me  to  take  one  hundred  and 
thirty  dollars  in  legal  tenders,  which  will  command 
one  hundred  days'  labor.  I  gladly  accept  the  offer, 
and  go  into  cotton  again.     When  it  is  again  ready 

3 


26  SCIENCE   OF  MONEY. 

for  market,  I  return  to  the  same  merchant,  and  am 
informed  that  all  the  world  has  been  sending  gold 
to  exchange  for  bills  drawn  against  cotton,  and  that 
he  will  give  me  one  hundred  and  thirty  dollars  in 
legal  tenders  and  twenty  dollars  in  gold  for  my 
cotton.  This  will  enable  me  to  make  good  my  old 
and  my  new  promise,  and  determine  me  in  the 
future  to  make  no  promises  of  produce  except  such 
as  I  know  can  be  raised  in  the  country. 

It  is  the  accumulation  of  capital  from  past  savings 
in  a  country  which  must  be  looked  to  for  its  develop- 
ment. This  is  contrary  to  the  idea  of  many  who 
oppose  concentration,  if  in  the  hands  of  a  few  indi- 
viduals ;  the  reverse  of  which  is  true  and  the  only 
safety.  If  capital  were  in  the  hands  of  the  majority, 
or  divided  on  the  agrarian  principle,  all  would  be 
shavers.  The  large  capitalist  wants  a  certain  interest, 
which  he  can  and  will  diminish  with  the  security. 
The  shaver  must  have  his  pound  of  flesh,  even  if 
nearest  the  heart. 

The  capitalist  may  give  tone  to  the  market  in 
quiet  times,  and  furnish  the  Gazette  with  quotations, 
but  in  times  of  sharp  competition,  and  derangement 
of  supply  and  demand,  the  middle-men  are  always  on 
the  market,  dictate  terms,  and  furnish  quotations. 
The  capitalist  who  is  accumulating,  or,  in  every-day 
language,  growing  rich,  is  investing  his  earnings  of 
rents  and  interest,  silent  and  smooth  in  his  course, 
like  a  deep  stream.  He  is  interested  only  in  pro- 
curing a  safe  and  profitable  investment  for  his  annual 
or  semi-annual  accumulation. 

However  small  the  rate  of  interest  may  be,  he  can 


GOLD   LEGAL    TENDER.  27 

live  and  prosper,  and  is  not  influenced  by  anything 
but  security.  It  is  not  so  with  the  middle-man.  He 
has  borrowed  at  a  rate  and  must  lend  at  an  advance, 
in  order  to  realize  a  profit  from  which  to  draw  his 
living.  And  thus  it  is  as  you  descend  in  the  scale 
of  dealers  in  money — each  drawing  from  it  a  living 
— the  discount  or  premium  widens,  until  you  reach 
the  shaver,  who  speculates  on  the  necessities  of 
mankind.  The  capitalist  is  aiding  reproduction, — 
the  shaver  endeavoring  to  draw  its  fruits  into  his 
own  pocket. 

To  illustrate :  Mr.  Snyder  went  to  an  eminent 
Virginia  politician  and  shaver  with  a  note  having 
fourteen  months  to  run.  He  inquired  the  rate  of 
discount,  and  was  told  that  it  was  so  much  per 
month.  After  the  calculation  was  made,  he  was  in- 
formed that  the  note  did  not  hold  out — in  other  words, 
the  note  did  not  equal  the  discount.  This  should  be 
a  warning  to  all  young  men,  in  their  estimate  of 
small  losses.  Give  those  small  losses  time  and  dis- 
count them  at  once,  and  presently  will  come  the  day 
of  bankruptcy,  or  when  the  note  will  not  hold  out. 

It  is  certainly  the  interest  of  the  government  and 
of  its  people  that  as  large  an  amount  as  possible  of 
its  bonds  and  indebtedness  be  retained  in  the  hands 
of  its  citizens. 

Nothing  will  hold  out  a  stronger  inducement  than 
to  declare  them  representative  of  a  legal  tender. 
This  will  make  all  parties  desirous  of  having  at 
hand  bonds,  even  if  in  small  amount,  in  order  that 
they  may  at  any  time  convert  them  into  legal  ten- 
ders.    If  a  horse  or  an  ox  be  required,  they  know 


28  SCIENCE   OF  MONEY. 

that  payment  can  be  promised  without  experiencing 
the  doubts  and  uncertainties  of  converting  any  other 
portion  of  their  stock  into  legal  tenders. 

I  cannot  illustrate  better  than  by  reference  to  the 
game  of  faro,  in  which  }tou  must  have  counters,  in 
order  to  avoid  the  inconvenience  of  a  subdivision  of 
the  money.  Now,  to  get  these  counters  you  must  go 
to  the  bank  with  something  acceptable  to  the  keeper. 
The  substance  required  you  may  not  have,  and  in 
order  to  obtain  it  you  must  sacrifice  perhaps  one  or 
two  assets.  Now,  if  you  knew  the  precise  article 
that  would  procure  these  counters,  it  is  but  reason- 
able to  suppose  that  you  would  keep  some  portion  of 
your  surplus  invested  in  it.  You  know  that  it  may 
be  needed  daily,  or,  at  least,  periodically. 

The  time  will  come  when  every  prudent  dealer  or 
producer  will  have  by  his  side  a  reasonable  reserve 
fund  of  bonds  with  which  he  can  at  any  time  pro- 
cure legal  tenders  by  the  abatement  of  interest  for 
a  certain  time.  Not  so,  however,  if  he  must  resort 
to  an  ordinary  banking  establishment.  It  may  be 
that  one  or  two  days  of  his  time  is  lost  in  dancing 
attendance  on  a  board  of  directors.  Even  should 
he  have  the  bonds  to  offer  as  security,  he  may 
fail  to  procure  the  accommodation  or  discount  if 
the  parties  to  whom  he  applies  are  engaged  in  the 
same  line  of  speculation.  They  may  promise  fair, 
talk  favorably  up  to  the  last  moment,  and  then  in- 
form him  that  it  can't  be  "did." 

If  he  has  the  United  States  bonds  in  his  pocket, 
he  can  act  like  an  independent  man,  without  cring- 
ing to  any  clique,  command  the  legal  tenders  and  at 


GOLD  LEGAL    TENDER.  29 

once  consummate  his  business.  Now  I  beg  leave 
to  return  to  the  other  dealer  of  faro,  who  keeps  the 
counters.  "When  the  producer  returns  to  the  market 
again,  desiring  some  more  counters  to  enable  him  to 
make  a  little  operation,  he  finds  that  the  faro-dealer 
left  on  the  last  steamer  for  Baden-Baden,  having 
been  advised  by  telegraph  that  a  good  thing  could 
be  made  out  of  his  counters  there,  on  account  of  the 
small  competition  and  large  accumulation  of  values 
in  that  market.  Many  think  that  because  gold  is 
the  circulating  medium  of  the  world,  it  is  all  the 
time  used  in  that  capacity.  They  do  not  remem- 
ber that  it  ceases  to  be  a  medium  or  measure  of 
value  whenever  it  is  in  demand  for  export,  and 
goes  into  the  hands  of  those  whose  specialty  is 
dealing  in  this  commodity.  A  commodity  it  cer- 
tainly has  become,  aud  is  nothing  more  than  so 
many  barrels  of  mess-pork  or  bales  of  cotton  col- 
lected at  the  point  of  export  by  the  dealer. 

The  circulating  medium  between  exports  and  im- 
ports being  now  bills  of  exchange,  and  no  longer 
gold,  or  any  other  device  to  be  used  as  counters  or 
the  medium  of  internal  exchange,  at  this  point  I 
would  call  attention  to  one  or  two  facts.  You  have 
seen  the  gold  circulating  medium  collected  by  the 
dealer  and  exporter.  "What  must  be  done  for  a  me- 
dium to  be  used  in  return  ? 

There  are  still  productions  to  be  bartered  and  ex- 
changed in  order  that  further  production  may  go  on 
and  obligations  be  liquidated.  "Will  you  have  the 
machinery  of  commerce  stand  still  until  the  gold 

3* 


30  SCIENCE   OE  MONEY. 

can  be  attracted  by  some  great  sacrifice  of  values  ? 
When  it  does  come,  as  it  will  do  if  you  have  goods 
to  offer  at  a  bargain,  it  can  answer  no  other  pur- 
pose than  to  liquidate  a  debt  between  John  Doe  and 
Richard  Roe,  or  to  effect  the  exchange  of  mess-pork 
for  flour. 

Any  other  counter  or  legal  tender  would  not  have 
subjected  consumption  and  production  to  all  this 
delay.  But  how  answer  the  same  purpose  ?  We 
could  have  awaited  the  return  of  the  gold  as  mer- 
chandise  in  exchange  for  our  cotton,  provided  we 
did  not  need  calico  instead.  At  any  rate,  the  great 
end  of  production  and  consumption  has  been 
effected. 

To  demand  of  gold  to  act  two  distinct  parts  at  the 
same  time — as  a  medium  of  exchange  and  as  mer- 
chandise  in  trade — is  to  attempt  to  endow  it  with 
omnipresence. 

If  two  substances  cannot  be  made  to  occupy  the 
same  space  at  the  same  time,  two  spaces  cannot  be 
filled  at  the  same  time  by  one  and  the  same  sub- 
stance. 

The  honorable  merchant  must  have  the  gold  here 
the  <lav  his  obligation  matures,  no  matter  what 
amount  of  other  goods  must  be  sacrificed.  Those 
unworthy  of  credit  will  hold  for  to-morrow,  however 
much  they  may  sacrifice  their  neighbors.  Bill  Arp 
was  tin!  in  the  war  himself,  but  he  was  willing  to 
Bacnfice  all  his  relations  in  the  cause. 

The  United  States  has  now  an  independent  circu- 
lating medium  in  her  legal  tenders,  and  as  much 
gold  as  is  equal  to  the  wants  of  commerce,  with  a 


GOLD  LEGAL    TENDER.  31 

large   reserve  to  meet  her  own   maturing  obliga- 
tions. 

The  onlv  incubus  resting;  on  trade  and  the  circu- 
lating  medium  is  the  apprehension  of  a  return  to 
gold  as  a  circulating  medium.  We  have  all  we 
want  as  a  measure  of  value, — productions  measure 
productions.  When  gold  wTas  our  circulating  me- 
dium and  measure  of  value,  a  few  millions  accumu- 
lated in  the  treasury  caused  such  derangement  that 
the  government  was  compelled  to  divide  it  out 
among  the  States,  in  order  to  restore  harmony. 
But  now,  with  one  hundred  millions  in  the  treasury, 
productions  still  command  productions,  however 
much  our  circulating  medium  may  be  appreciated 
or  depreciated  by  comparison  with  gold. 

In  specie-paying  times,  to  have  hoarded  up  this 
amount  of  gold  would  have  bankrupted  the  circula- 
tion of  our  country  and  deranged  the  equilibrium 
of  trade  in  all  parts  of  the  commercial  world. 

We  are  using  a  circulating  medium  independent 
of  all  the  world.  From  this  channel  gold  has  been 
withdrawn,  and  now  occupies  the  same  position  as 
cotton,  pork,  and  flour.  So  long  as  we  have  other 
articles  of  value  to  export,  no  one  will  call  for  gold. 
On  the  other  hand,  so  long  as  we  have  a  surplus  to 
exchange  for  it,  we  will  never  be  without  that  uni- 
versal commodity.  A  country  which  has  not  bread, 
nor  anything  to  exchange  for  it,  must  perish.  Gold 
it  can  do  without.  Nor  will  a  people  trouble  itself 
much  about  it  so  long  as  their  productions  can  be 
turned  into  the  productions  of  others  which  they 
require  for  consumption  or  reproduction.     It  is  the 


32  SCIENCE   OF  MONEY. 

increase  in  production  which  calls  for  an  increase  in 
the  circulating  medium.  All  sums  above  this  de- 
mand are,  to  a  certain  extent,  not  needed, — thrown 
on  the  market,  and,  to  that  extent,  worthless. 

The  use  of  a  circulating  medium,  or  the  consent 
to  have  one,  creates  the  measure  for  it.  Hence  the 
difference  between  commodities  and  the  medium  of 
exchange.  Commodities  demand  a  medium  of  ex- 
change, but  the  medium  demands  nothing,  and,  if 
redundant,  becomes  worthless  to  that  extent.  A 
circulating  medium  is  not  used  because  of  any  in- 
trinsic value,  but  it  has  been  made  the  medium. 

It  has  been  recommended  as  being  equal  to  the 
cure  of  this  disease,  and  should  not  be  looked  upon 
as  a  universal  panacea,  and  called  a  measure  of  value 
as  well  as  a  medium  of  exchange. 

Steamboats  are  in  their  element  when  on  navi- 
gable streams,  locomotives  when  on  the  iron  track; 
neither  can  assume  the  position  of  the  other  with 
safety  or  profit.  Where  is,  or  can  be,  the  con- 
troversy in  regard  to  the  utility  or  necessity  of  a 
circulating  medium  to  effect  the  exchanges  of  the 
country  ?  Can  there  be  any  as  to  the  gain  of  interest 
to  the  party  having  power  to  issue  them?  This 
point  being  conceded,  no  one  certainly  can  be  so 
selfish  as  to  wish  to  deprive  the  people  of  what 
belongs  to  them  by  right  and  risk.  If  there  is  any 
prospect  of  loss,  by  all  construction  of  law  and  jus- 
tice, the  party  risking  it  should  participate  in  the 
profits. 

I  am  well  aware  Unit  many  will  contend  that  if 
the  assuming  power  of  circulating  notes  should  be 


GOLD  LEGAL    TENDER.  33 

solely  in  the  hands  of  the  government,  the  effect 
would  be  to  close  up  all  the  private  banking  establish- 
ments against  making  discount.  To  a  certain  extent 
this  may  be  the  case,  but  it  will  only  apply  to  the  wild- 
cat concerns  that  attempt  to  speculate  on  the  credulity 
of  the  people,  and  at  no  time  had  any  other  capital 
than  what  the  people  deposited  with  them,  whilst 
giving  them  credit  and  circulating  a  note,  and  pay- 
ing, in  the  majority  of  cases,  a  shaving  rate  of  dis- 
count, when  the  note  is  not  as  solvent  as  the  one 
discounted,  these  notes  frequently  being  redis- 
counted  to  create  a  fund  for  the  speculative  direc- 
tors to  gamble  on,  and  when  the  collapse  does  come 
the  solvent  note  of  the  producer  must  be  paid  in 
some  other  currency  or  medium.  In  answer  to  this 
objection,  we  may  adduce  the  general  disposition 
manifested  on  the  part  of  all  the  best-regulated  pri- 
vate banking  houses,  not  only  of  this  country,  but 
of  Europe,  to  use  in  their  daily  business,  from 
which  they  grant  loans  and  discount,  circulating 
notes  other  than  their  own.  This  is  especially  the 
case  in  England,  where  the  circulating  notes  are 
issued  by  the  Bank  of  England. 

The  effect  of  this  is  to  concentrate  the  reserve, 
giving  greater  security,  and  relieving  all  the  other 
parties  from  the  periodical  discredits  growing  out 
of  a  drain  of  the  precious  metals.  Previous  to  the 
war,  the  great  bulk  of  the  circulating  medium  used 
by  the  banks  of  New  York  City  in  the  discounts 
and  loans  was  not  issued  by  them,  but  by  other 
interior  establishments, — the  free  use  of  certified 
checks  effecting  all  the  exchange  of  the  city,  their 


34  SCIENCE   OF  MONEY. 

discounts  and  loans  being  made  from  capital  and 
deposit. 

The  tendency  of  a  circulation,  if  the  issuing  power 
is  in  the  hands  of  the  government,  will  be  to  induce 
capitalists  and  banking  establishments  to  keep  their 
reserve  in  bonds,  knowing  they  can  convert  them  into 
legal  tenders  at  the  moment  of  need.  This  is  vir- 
tually discounting  your  notes  in  order  to  place  them 
in  some  other  channel.  The  specie  reserve  that  is 
now  kept  on  hand  can  all  be  used  in  loans  and  dis- 
counts. Now,  when  I  speak  of  capitalists,  I  include 
the  small  balances  over  immediate  consumption  in 
the  hands  of  all  classes.  All  of  their  reserve  will  be 
invested  in  bonds,  from  the  fact  that  they  can  wait 
until  the  day  of  need  before  conversion,  and  will 
not  be  forced  to  dance  attendance  on  some  director 
of  a  bank  for  a  discount,  which  in  time  of  need  is 
not  a  certainty.  By  the  inauguration  of  this  cir- 
tainty  new  life  will  be  given  to  trade,  enabling  the 
whole  country  to  sail  close  to  the  wind,  and  have 
but  little,  it  any,  reserve  fund, — idle  or  useless  to 
the  country. 

I  hold  that  if  a  man  desiring  a  discount,  and  in 
possession  of  a  security  to  warrant  a  discount  at 
bank,  could  go  to  a  neighbor  and  borrow  a  bond  on 
the  same  terms,  the  tendency  of  this  would  be  to 
turn  the  attention  of  the  country  to  the  National 
Deli!  and  renew  the  spirit  of  protection,  and  finally 
place  bonde  on  a  par  with  gold  or  any  other  four  per 
•  •.■lit.  investment.  Tin-  time  may  come  when  these 
investments  may  command  a  premium  over  any 
other  government,  from  the  fact  that  it  is  not  only 


GOLD   LEGAL    TENDER.  '  35 

an  investment,  but  one  that  will  command  a  circu- 
lating medium  and  legal  tender,  both  of  which  have 
their  value  in  the  market.  There  are  times  when 
secure  investments  are  at  a  premium,  or  a  low  rate 
of  interest,  and  times  when  a  medium  of  exchange 
will  command  a  premium.  Wow,  if  there  be  a  con- 
junction of  these  favorable  influences,  it  certainly 
will  return  a  larger  profit  than  either  one  can  pro- 
duce singly.  Will  not  this  consideration  be  taken 
into  account  by  capitalists  ?  It  is  their  trade  and 
business  to  note  each  item  in  the  account  of  profit 
and  loss,  growing  out  of  production  and  reproduc- 
tion. When  they  cease  to  do  this,  investments  will 
be  at  a  discount,  and  accumulations  a  farce.  The 
business  of  banking  is  distinct  and  independent  of 
production  when  not  speculative,  but  safely  con- 
ducted. After  all,  whatever  the  medium  may  be 
by  which  the  exchanges  are  effected,  it  is  only  the 
reproduction  of  capital  or  counters.  The  real  cap- 
ital of  the  country  is  the  raw  materjal,  food,  ma- 
chineiw,  vessels,  etc.,  and  these  absorb  the  entire 
business  the  community  can  carry  on.  After  the 
recognition  of  a  well-regulated  currency  is  estab- 
lished, the  facility  of  procuring  discounts  from  a 
bank  cannot  increase  or  diminish  their  quantity. 
The  same  amount  of  values  remain  in  the  country 
and  stimulate  a  corresponding  trade,  and  can  only 
affect  the  rate  of  interest,  the  result  of  which  will 
be  measured  hy  the  competition  between  lender 
and  borrower. 

It  is  only  necessary  that  the  government  declaro 
that  legal  tenders  are  equal  to,  or  will  be  converted 


36  SCIENCE   OF  MONEY. 

into,  a  gold-bearing  bond  of  four  per  cent,  interest, 
semi-annual,  to  give  them  a  fixed  value  to  that  ex- 
tent,— income  being  the  measure  of  value.  The 
fluctuations  from  this  can  only  be  to  the  extent  of 
the  current  rate  of  interest,  demanded  by  the  course 
of  trade  and  tendency  to  speculation.  If  this  be  the 
basis  of  their  value,  all  will  understand  their  worth, 
and  so  long  as  we  give  evidence  of  ability  to  pay 
four  per  cent.,  which  can  only  be  from  an  annual 
surplus,  all  investments  will  be  based  on  this  prom- 
ise, and  no  great  fluctuations  can  take  place  from 
ignorance  of  their  value  or  how  they  are  to  be  paid. 
This  is  all  the  government  can  do :  no  power  can 
fix  and  keep  unchangeable  any  legal  tender  or  other 
commodity.  They  regulate  themselves;  if  redun- 
dant on  the  market,  the  price  or  exchangeable  value 
must  sink.  The  converse  of  this  holds  equally  good, 
and  will  bring  appreciation,  while  the  former  gives 
depreciation.  In  order  to  have  no  fluctuations,  from 
want  of  confidence,  the  government  must  make  a 
promise  she  can  keep,  and  then  show  a  disposition 
to  maintain  it. 

All  I  claim  for  this  divorcement  of  the  circulating 
medium  from  merchandise  is,  to  free  it  from  those 
periodical  fluctuations  incident  to  a  foreign  demand 
for  the  same  medium.  And  as  we  are  compelled  to 
have  in  the  exchanges  of  our  internal  commerce  a 
medium,  let  us  have  the  one  most  advantageous  to 
the  country.  I  claim,  as  equally  economical,  the 
vast  saving  to  the  country  in  the  annual  wear  and 
tear  in  keeping  up  a  medium  so  expensive  as  gold. 
This  is  no  more  than  has  been  claimed  by  all  modern 


GOLD   LEGAL    TENDER.  37 

political  economists,  from  Adam  Smith  to  Ricardo. 
They  contended  for  a  convertible  medium,  of  paper, 
or  something  of  less  value  than  gold.  And  their 
views  were  engrafted  upon  the  Bank  of  England,  so 
far  as  to  effect  a  separation  of  the  issue  from  the  bul- 
lion department.  Under  this  system  the  greatest 
uniformity  has  been  inaugurated,  and  full  confidence 
in  her  notes  for  circulation. 

The  extreme  wants  of  trade  and  pressure  in  two 
instances  induced  Parliament  to  remove,  temporarily, 
the  restrictions  of  the  "Peel  Act;"  the  necessity 
which  called  for  this,  each  time,  can  be  traced  to 
causes  other  than  those  growing  out  of  a  paper  cir- 
culating medium.  Many  causes,  besides  inflation 
or  contraction,  conspire  to  derange  the  affairs  of 
commerce,  especially  where  the  circulating  medium 
is  convertible  into  gold  on  demand.  A  deficient 
grain  crop  in  England,  in  the  absence  of  a  brisk 
demand  for  her  manufactured  goods,  will  cause  a 
quick,  sharp  demand  for  the  precious  metals  for 
export,  gold  being  the  only  commodity  left  to  offer 
foreigners,  without  a  sacrifice,  in  exchange  for  food. 
And  this  must  continue  until  the  prices  of  other 
commodities,  which  they  have  for  sale,  fall  to  a 
point  tempting  speculation  at  home  and  abroad. 
During  this  interval  the  demand  for  gold  must  con- 
tinue. Before  this  last  resort  comes,  bankers  and 
capitalists  will  call  in  from  distant  correspondents 
the  last  available  dollar,  and  then  only  can  relief  be 
had. 

Countries,  like  individuals,  in  times  of  diminished 
supplies  may  have  to  part  with  every  available  value 

4 


38  SCIENCE   OF  MONEY. 

to  procure  the  means  of  existence,  which  must  be 
had  though  the  accumulations  of  years  be  exhausted 
in  the  purchase.  Contingencies  so  unfortunate  ad- 
mit of  no  delay  ;  and  whatever  exists  of  any  other 
surplus  must  be  parted  with  at  the  instant  of  want, 
however  much  the  market  may  be  depressed.  Con- 
tingencies like  this,  with  England  so  intimately  con- 
nected with  the  great  export  article  of  this  country, 
cotton,  impose  upon  those  looking  to  her  for  a 
market  a  large  share  of  her  misfortunes;  conse- 
quently, prices  may  sink  even  below  the  cost  of  pro- 
duction, while  her  wants  are  being  supplied  with 
bread. 

It  is  a  well-established  fact  that  when,  from  large 
crops  and  favorable  seasons,  the  produce  of  a  coun- 
try is  doubled,  it  will  only  sell  for  one-half  of  what 
it  would  provided  the  circulating  medium  were  in-  ' 
creased  in  the  same  ratio.  It  is  in  the  inverse  ratio 
to  the  supply,  and  can  only  circulate  so  much  pro- 
duce, and  no  more.  Many  will  contend  that,  if  this 
proposition  hold  good,  half  crops  only  should  be 
made.  They  might  as  well  insist  on  one-half  a  loaf 
being  as  good  as  a  whole  one.  I  admit  that  half  a 
loaf  is  better  than  no  bread,  but  it  is  not  equal  to  a 
whole  one.  What  I  am  contending  for  is  that  every 
one  should  be  allowed  the  largest  liberty  in  eifect- 
ing  exchanges,  and  not  be  confined  to  a  particular 
measure  of  value;  in  a  word,  if  I  attend  a  fair  at 
Newcastle,  I  may  not  be  forced  to  take  coals,  but 
may  have  the  liberty  of  inking  my  surplus  to  be 
exchanged  for  that  of  others.  Many  difficulties 
will  suggesl  themselves  to  the  minds  of  those  who 


GOLD  LEGAL    TENDER.  39 

have  never  thought  of  a  divorcement  of  money  of 
account  from  an  exportable  article  of  merchandise 
like  gold,  and  they  will  hastily  condemn  the  scheme 
as  wild  and  visionary.  The  defense  and  reasoning 
in  behalf  of  the  former  will  go  far  to  quiet  all  fears 
and  dissipate  the  anticipated  evils  which  surround 
the  dissolution. 

For  twenty-five  years  during  the  suspension  of 
specie  payments  by  the  Bank  of  England,  commerce 
and  production  grooved  out  their  own  channels,  and 
felt  but  little  if  any  inconvenience  from  the  neces- 
sity which  forced  a  recognition  of  a  circulating 
medium  whose  value  was  only  formed  by  the 
amount  of  commodities  for  which  it  could  be  ex- 
changed, and  not  by  the  remote  prospect  of  con- 
version into  gold. 

To  have  estimated  their  value  on  the  contingency 
of  the  resumption  of  specie  payment  by  the  bank, 
the  long  delay  being  foreseen  and  fixed,  would  have 
given  but  a  few  cents  value  to  her  circulating  notes. 
It  was  not  the  ultimate  prospect  of  payment  in  gold 
which  gave  value  to  her  notes,  but  the  necessity  of 
a  circulating  medium,  and  the  consent  of  the  pro- 
ducer to  receive  them  in  exchange  for  commodities 
and  as  legal  tenders,  thereby  establishing  a  circuit 
in  the  exchange  of  commodities.  This  caused  the 
barometer  of  trade  to  indicate  the  position  of  Eng- 
land's great  surplus  with  certainty  as  unerring  as 
though  the  circulating  medium  had  been  gold, 
without  being  subjected  to  the  many  charges  of 
transfer  from  country  to  country.  For  three  years 
after  the  suspension  of  the  Bank  of  England,  and 


40  SCIENCE   OF  310NEY. 

so  long  as  she  was  prudent  in  the  issue  of  her  notes, 
these  notes  were  not  only  at  par,  but  at  times  bore 
a  premium  of  three  per  cent,  over  gold ;  and  it  was 
not  until  she,  like  others,  entered  into  wild  specula- 
tions that  her  notes  fell  below  par.  So  soon  as  she 
reduced  her  amount  of  notes  to  the  wants  of  a  cir- 
culating medium,  they  again  rose  to  par.  By  this 
reduction  she  apparently  made  less  monej',  but  in 
the  aggregate,  from  a  prudent  circulation,  realized 
more,  without  the  same  risk  of  impairing  her 
capital.  Tins  demonstrates  that  paper  money,  if 
properly  restricted,  and  recognized  as  legal  tender, 
will  answer  all  the  purposes  of  gold  for  a  circu- 
lating medium,  without  entailing  on  the  country 
the  wear  and  tear  and  loss  by  shipwreck  in  trans- 
portation from  country  to  country. 

It  is  now  in  the  power  of  the  government  to  effect 
this  divorcement,  without  any  change  of  policy  ex- 
cept as  regards  the  extension  of  it;  and  this  exten- 
sion will  be  subject  only  to  the  demands  of  trade. 
Nothing  will  be  forced,  but  all  for  the  interest  of 
the  people  in  lessening  their  taxes.  If  it  is  to  the 
interest  of  the  people  to  keep  up  the  circulation  of 
legal  tenders  to  the  fall  wants  of  the  country,  which 
it  certainly  is,  as  it  lessens  taxes,  it  is  not  to  be  pre- 
sumed that  the  government  will  inaugurate  a  dif- 
ferent plan,  which  instead  of  encouraging  would 
defeat  her  efforts  to  produce  a  uniform  currency, 
driving  it  in,  and  bringing  on  all  the  calamities  of 
repudiation. 

To  estimate  or  look  upon  a  national  currency  as 
suspicious  or  worthless,  is  not  only  national  repudia- 


GOLD  LEGAL    TENDER.  41 

tion,  but  an  evidence  of  individual  disposition  to 
discourage  an  honorable  support  of  whatever  the 
load  of  debt  might  be. 

When  the  amount  of  issue  is  regulated  by  the 
supply  and  demand,  and  is  uninfluenced  by  the 
prospect  of  individual  gain,  no  overissue  is  likely  to 
take  place.  "With,  a  free  conversion  of  bonds  into 
legal  tenders,  and  vice  versa,  and  a  maintenance  of 
ability  on  the  part  of  the  government  to  pay  the 
interest  with  a  prompt  and  honorable  adjustment  of 
the  same,  success  will  be  guaranteed. 

The  foreign  commerce  of  the  country  is  now  so 
large,  requiring  sums  so  immense  at  times  for  the 
liquidation  of  balances,  that  it  becomes  the  duty 
of  the  government  to  divorce  the  internal  com- 
merce of  the  country  from  an  article  so  variable  in 
value  as  gold.  If  we  continue  it  longer  as  the  only 
legal  tender  and  measure  of  value,  and  use  it  as  a 
circulating  medium,  the  periods  of  revulsion  will 
soon  be  as  fixed  as  the  rising  and  setting  of  the  sun, 
— up  with  large  production,  and  down  with  years 
of  scarcity.  To  say  nothing  of  the  legitimate  de- 
mand incident  to  our  foreign  commerce,  the  growth 
of  the  spirit  of  speculation  and  gambling  in  the 
gold  market,  and  the  continual  bear  and  ball  influ- 
ence brought  to  buoy  up  or  depress  the  price,  should 
be  sufficient  warning  to  the  government  that  there 
can  be  no  longer  any  safety  in  it  as  a  measure  of 
value  or  circulating  medium.  It  will  be  ruinous  to 
the  best  interest  of  the  producing  class  to  subject  it 
to  the  daily  fluctuations  of  an  article  which  can  be 

forced  to  vary  from  five  to  twenty-five  per  cent,  in 

4* 


42  SCIENCE   OF  MONEY. 

one  day, — not  in  value  nor  from  any  legitimate  de- 
mand, but  wholly  by  the  influence  of  the  reckless 
spirit  of  a  gambler.  It  certainly  cannot  be  safe  or 
secure  to  the  commerce  of  a  country  to  make  it  a 
measure  of  value  when  the  speculative  influences 
and  gambling  of  a  few  capitalists  can  buy  and  sell 
four  hundred  millions  in  one  day, — a  sum  almost 
equal  to  the  entire  exports  of  the  country  for  one  year, 
the  legitimate  demand  of  which  would  be  only  the 
difference  between  imports  and  exports,  which  or- 
dinarily could  not  exceed  five  per  cent,  of  this  im- 
mense sum,  or  twenty  million  dollars. 

The  value  of  all  articles  being  measured  by  the 
intensity  of  demand,  the  natural  inference  from  a 
transaction  so  enormous  would  be  that  the  whole 
world  was  short  of  gold,  and  was  compelled  to  have 
it  immediately,  if  the  acquisition  cost  the  last  dollar 
of  all  other  values.  JSTo  one  in  his  senses  can  be 
induced  to  think  that  this  sum  could  or  would  be 
needed  in  the  transfer  of  produce  for  consumption 
or  reproduction.  The  idea  is  preposterous!  The 
tenth  part  of  this  sum  would  bankrupt  the  Bank  of 
England  and  the  Bank  of  France,  or  cause  their  sus- 
pension. It  now  becomes  the  government,  if  itcannot 
remove  the  nuisance  or  incubus  on  production,  to 
mitigate  it,  and  not  allow  its  baneful  influences  any 
longer  to  affeel  its  legitimate  collection  of  taxes  and 
the  paymenl  of  debts.  A  steady  fixed  purpose  to 
liquidate  to  the  lasl  dollar,  with  the  use  of  the  great- 
est economy  in  all  things,  is  its  only  financial  duty. 
When,  or  where,  or  how  much  gold  it  shall  sell 
in  comparison  with  the  gold  clique,  is  not  the  ques- 


FLUCTUATIONS— THEIR   EFFECT.  43 

tion  for  consideration.  The  only  influences  which 
can  honorably  be  brought  to  bear  on  all  commodities 
should  be  such  as  are  incident  to  its  own  wants, 
ways,  and  means.  Then,  under  the  rule  of  attend- 
ing to  its  own  business,  the  government  will  not  be 
subjected  to  the  fluctuations  arising  from  the  com- 
plications of  others. 

The  attempt  to  apply  a  remedy  to  the  wants  of 
speculation  is  only  inflicting  a  new  wound  to  be 
healed.  Let  speculation  adjust  itself  to  its  own 
wants. 


FLUOTUATIONS-THEIK  EFFECT. 

The  fewer  fluctuations  in  the  internal  commerce 
of  a  country,  the  greater  the  security  in  the  trans- 
actions and  exchange  of  commodities  based  on 
present  or  future  delivery. 

When  this  is  the  case,  the  exports  and  imports  will 
have  to  abide  the  fluctuations  connected  with  their 
own  transaction,  each  looking  for  their  own  safety 
and  profit.  This  is  precisely  as  it  should  be,  and 
what  I  am  now  endeavoring  to  demonstrate. 

The  foreign  trader  deals  with  all  countries  on  this 
basis  of  value  or  circulating  medium,  which  is, 
after  all,  but  bills  of  exchange,  or  in  a  transfer  of 
credits.  Hence  the  fluctuations  that  may  attend 
them  after  the  producer  has  parted  with  his  property 
should  not,  by  a  reflex  action   on  the  circulating 


44  SCIENCE   OF  MONEY. 

medium  of  the  producer,  cause  him  to  share  in  the 
attendant  losses. 

If  the  original  producer  has  his  own  independent 
circulating  medium,  he  will  not  be  involved  in  the 
fluctuations  of  other  countries;  nor  will  he  have  to 
share  their  losses,  and  can  only  be  called  upon  to 
adjust  and  conform  his  surplus  productions  to  the 
surplus  of  those  with  whom  he  wishes  to.  effect  an 
exchange.  In  a  word,  producers  will  measure  values 
with  values,  neither  of  which  will  be  affected  by 
the  medium  used  in  effecting  the  exchange.  Each 
party  will  profit  or  lose  only  by  the  over-  or  under- 
supply  of  their  own  circulating  medium  or  standard 
of  value.  * 

If  in  this  I  have  made  myself  clear,  you  can 
readily  perceive  the  point  or  line  of  separation  be- 
tween values  or  commodities,  and  the  circulating 
medium  used  in  their  transfer.  The  country  having 
its  independent  medium  of  exchange  will  not  be  in- 
volved in  the  losses  incident  to  a  circulating  medium 
common  to  all  countries;  nor  can  she  be  called  on 
to  participate  in  their  speculations,  even  should  it 
be  their  standard  of  value.  We  have  seen  that  this 
can,  without  any  assignable  cause,  be  made  to  fluc- 
tuate twenty-five  per  cent,  in  one  day,  or  involve 
one-quarter  of  a  man's  estate,  should  he  be  so  un- 
fortunate as  to  full  on  that  day  in  the  footing-up  of 
a  maturing  obligation. 

Now,  should  any  article  of  merchandise  become 
superabundant  by  some  wonderful  process  of  pro- 
duction, or  should  a  sudden  calamity,  as  a  great  con- 
flagration, cut  short  the  supply  in  one  day,  then  this 


FLUCTUATIONS— THEIR   EFFECT.  45 

great  fluctuation  would  seem  natural.  In  all  candor, 
does  it  seem  reasonable  or  just  to  retain  a  commodity 
like  this  as  a  standard  of  value,  and  call  into  the  ring 
the  honest  producer  with  his  hard-earned  values, 
and  force  him  to  participate  in  its  loss  ? — have  his 
values  measured  by  such  a  yard-stick,  which,  if  not 
dishonestly  clipped,  has  been  immensely  shortened? 

For  many  years  under  what  was  called  the  mer- 
cantile system,  which  advocated  and  held  that  all 
wealth  consisted  of  the  precious  metals,  the  idea 
was  almost  universal.  The  influence  still  exists  over 
many  minds;  but  the  more  enlightened  portion  of 
mankind  have  long  since  abandoned  the  fallacy,  and 
estimate  gold  at  its  intrinsic  value  only,  like  any  other 
commodity.  So  far  as  its  purchasing  power  is  con- 
cerned, it  is  owing  to  the  influence  exerted  on  the  mer- 
chant or  trader  from  the  facility  of  a  ready  exchange 
for  all  other  commodities  that  it  is  more  sought  after 
than  other  productions;  and  the  fact  that  it  is  a 
legal  tender,  as  well  as  a  circulating  medium,  makes 
all  men  feel  more  at  ease  under  maturing  obliga- 
tions, with  the  legal  tender  in  sight,  than  they  would 
with  the  possession  of  any  other  merchandise;  hence 
the  double  desire  to  possess  it,  and  also  from  the 
fear  that  it  may  be  doubly  important  in  time  of 
need.  This  feeling  is  natural  and  instigated  by  the 
soul  of  honor  and  punctuality. 

It  is  this  indefinite  influence  which  gives  gold  its 
principal  value  in  exchange.  There  is  no  law  beyond 
common  consent  to  compel  men  to  take  it  for  their 
goods.  If  this  be  the  case,  it  is  precisely  at  this 
point  its  greatest  value  is  fixed  and  given  to  it. 


46  SCIENCE   OF  MONEY. 

Strip  it  of  this,  and  it  settles  down  on  its  own  merit, 
as  a  legal  tender  by  law,  to  liquidate  with,  and  not 
by  common  consent  as  a  medium.  In  all  other 
respects  it  is  treated  as  a  commodity,  but  with  rev- 
erence. This  arises  from  the  fact  that  the  majority 
of  men  and  governments  are  debtors.  Beyond 
this  point  all  legal  tender  or  measure  of  value  is 
surplusage. 

Man  feels  content  under  mere  promises  with  this 
commodity  in  possession.  When  you  sum  up  all,  it 
is,  as  a  legal  tender,  only  applicable  to  the  debtor, 
and  cannot  force  the  possessions  or  values  of  any 
man  to  change  hands. 

The  purchase  of  bonds  by  the  government  at  a 
premium  is  calculated  to  deceive,  whilst  it  is  urged 
as  economy  or  cheapening  the  rate  of  interest,  or 
that  it  will  work  a  diminution  of  our  taxes;  so  far 
from  this,  it  is  the  purchasing  of  a  new  obligation, 
and  the  payment  of  the  full  interest  for  all  the  time 
the  debt  has  to  run  to  maturity.  The  case  is  not 
altered  if  the  government  should  make  a  new  loan 
at  a  less  rate  of  interest.  The  burden  of  taxes 
will  not  be  lessened  from  the  fact  that  the  full  rate 
o!"  the  larger  interest  has  been  anticipated.  The 
government  is  left  in  the  position  it  would  have 
occupied  at  the  maturity  of  the  bond  and  the  ac- 
ceptance then  of  the  lower  rate  of  interest.  Pre- 
cisely the  same  effect  is  produced  by  the  collection 
and  sale  of  gold,  whatever  may  be  the  pressure.    In 

ither  of  these  is  there  either  saving  or  economy 
to  the  country,  but,  instead,  an  absolute  loss  by 
the   continual    excitement  and   feverishness   in  all 


FLUCTUATIONS— THEIR   EFFECT.  47 

branches  of  trade,  arising  from  the  sale  and  pur- 
chase. All  this  may  answer  a  purpose  politically, 
and  give  men  place  and  power  for  the  moment.  The 
least  that  can  be  said  of  its  influence  and  effect  is 
that  it  encourages  and  stimulates  the  most  baneful 
species  of  gambling  in  every  branch  of  trade — de- 
moralizing  to  the  best  forms  of  societv.  None  have 
power  to  condemn,  as  it  is  indorsed  by  the  highest 
authority. 

I  admit  that  many  difficulties  surround  this  en- 
tire question  which  require  time  and  a  determined 
course  to  overcome.  In  order  the  more  fully  to  under- 
stand and  appreciate  these  difficulties  we  must  look 
at  our  debt  from  a  different  stand-point,  so  that  we 
may  find  means  of  extinction.  Our  debt  is  now  a 
fixed  fact,  both  principal  and  interest.  It  was  created 
under  circumstances  the  necessity  of  which  no  one 
will  question.  There  was  no  time  to  higgle  about 
rates  of  interest.  The  borrower  was  at  the  mercy 
of  the  lender.  The  money  was  to  be  had  at  all 
hazards,  under  all  the  disadvantageous  circum- 
stances surrounding  the  possible  disintegration  of 
the  country.  The  rate  of  our  principal  debt  could 
not  reasonably  have  been  reduced  below  six  per 
cent,  per  annum.  The  promise  of  interest,  however 
onerous,  is  now  as  much  a  part  of  the  debt  as  the 
principal,  and  requires  the  same  process  of  liquida- 
tion. This  can  be  done  only  by  a  payment  of  both. 
The  earlier  it  is  done,  the  greater  the  economy.  If 
we  can,  as  we  are  entitled  to  do,  borrow  money  at  a 
less  rate,  say  four  per  cent.,  this  process  will  pro- 
duce an  absolute  saving  to  the  country  of  fifty  per 


48  SCIENCE   OF  MONEY. 

cent.,  interest  being  the  measure  of  debt  as  well  as 
of  the  value  of  incomes. 

To  effect  this  desirable  end  at  an  early  day,  and 
insure  its  easy  accomplishment,  we  must  show 
ability  to  pay  not  only  the  interest,  but  also  the 
principal.  There  would  be  no  difficulty  in  effecting 
a  loan  at  four  per  cent,  if  the  government,  instead 
of  sellinggold,  at  once  applied  every  dollar  to  taking 
up  her  bonds,  which  she  now  has  the  opportunity  of 
doing,  in  accordance  with  the  original  contract;  and 
open  a  loan  at  four  per  cent,  gold,  I  feel  confident 
that  it  would  soon  be  taken  up,  especially  if  the 
promise  to  pay  principal  and  interest  in  gold  should 
be  coupled  with  the  engagement  to  convert  them 
into  legal  tenders  when  demanded.  Their  fixed  value, 
the  entire  closing  up  of  the  contingency  of  how  and 
when  they  are  to  be  paid,  with  the  certainty  of  a 
conversion  into  a  circulating  medium  whenever  the 
demands  of  commerce  require  it,  will  give  to  the 
loan  a  double  value  to  the  full  extent  of  the  circula- 
ting medium. 

I  cannot  but  take  this  view  of  their  worth  when 
I  cast  my  eye  over  this  immense  country,  so  prolific 
in  all  the  commodities  indispensable  to  man's  wants, 
— unlike  the  productions  ministering  to  luxury  and 
e,  but  such  as  will  command  the  values  of  all 
nations  and  peoples. 

When  the  capitalist  looks  upon  this  bond,  yielding 
a  fair  and  sure  interest,  and  upon  these  great  and 
increasing  provisions  for  man's  wants  and  necessi- 
ties, and  reflects  that  he  can  at  any  moment  command 
them  by  simply  converting  the  bond  into  legal  ten- 


FLUCTUATIONS— THE [R   EFFECT.  49 

ders,  he  will  tell  you  that  it  is  the  cheapest  reserve 
fund  he  could  keep  by  him,  to  command  the  fluctu- 
ations in  rates  of  interest  incident  to  commerce, 
springing  from  a  deficiency  in  the  food-crops  of  other 
countries.  If  a  great  famine  should  again  stalk 
over  the  fair  Emerald  Isle,  we  would  not  then  be 
compelled  to  pay  freight,  insurance,  interest,  and 
other  heavy  charges  on  gold  to  be  sent  here  to  pur- 
chase our  bread.  These  items  alone  often  amount 
to  more  than  ten  per  cent.,  all  of  which  would  have 
to  be  paid  or  abated  before  we  could  send  them  our 
surplus  in  exchange  for  their  surplus  gold.  This 
ten  per  cent,  would  be  not  only  a  loss  to  us  in  the 
price  and  value,  but  so  much  deducted  from  their 
bread,  on  account  of  the  expensive  medium  which 
the  merchant  would  be  compelled  to  use  in  the  pur- 
chase. Now,  would  it  not  be  better  that  this  sum 
should  be  divided  between  all  the  parties  interested, 
realizing  more  to  us  for  our  produce,  and  giving  to  \ 

Ireland  more  bread  ?  If  the  laws  of  legal  tenders  °\ 
did  not  call  on  them  for  gold,  which  would  derange  *\ 
the  circulating  medium,  and  perhaps  bring  on  a 
panic,  prostrating  credit,  a  few  of  our  bonds,  if  they 
had  them,  could  be  sent  here  and  converted  into 
legal  tenders,  and  the  proceeds  sent  to  them  in  bread. 
Otherwise,  the  derangement  of  credit  might  so  inter- 
fere with  commercial  affairs  as  to  deprive  the  Irish 
people  of  the  relief  we  were  so  willing  to  extend 
them.  To  effect  this  great  saving  not  only  to  them 
but  to  us,  however,  a  change  in  our  legal  tender  or 
circulating  medium  is  required.  Another  immense 
advantage  to  the  country  from  this  prompt  payment 

5 


fr 


50  SCIENCE   OF  MONEY. 

of  gold  for  bonds,  not  so  readily  seen,  but  surely  to 
be  felt,  is  the  cheapening  influence  on  gold. 

The  moment  we  abandon  gold  as  a  medium  of 
value  or  a  circulating  medium,  and  throw  it  all  on 
the  market  in  the  payment  of  bonds,  its  market 
rate  will  decline  in  all  commercial  centers,  in  the 
exact  ratio  of  the  extent  of  our  currency  and  circu- 
lating medium  as  compared  with  those  of  all  other 
countries  which  recog-nize  the  same  standard  of 
value.  When  we  disburse  one  hundred  millions  of 
gold,  the  effect  will  be  the  same  as  if  that  sum  had 
been  vomited  up  from  the  mines  without  any  of 
the  expense  attendant  on  the  ordinary  process  of 
mining.  And  so  long  as  we  continue  this  process 
of  collecting  gold  as  revenue,  and  using  it  in  pay- 
ment of  debt,  so  long  will  the  credit  and  value  of 
bonds  appreciate  in  the  market.  In  a  word,  it  is 
not  only  the  creation  of  a  new  value,  but  the  use  of 
it  in  the  payment  of  debt, — giving  evidence  to  the 
world  that  not  merely  can  we  command  gold,  but 
that  we  have  the  good  faith  to  apply  it  at  once  to 
the  liquidation  of  obligations  in  accordance  with  the 
stipulation  in  the  bond.  This  system,  honestly  acted 
upon  for  a  few  years,  will  give  to  the  country  such 
credit  that  we  may  be  able  to  negotiate  a  loan  in 
gold  at  three  per  cent.  Ability  to  pay,  and  the  appli- 
cation of  the  means,  will  give  to  our  national  debt 
all  the  credit  that  can  be  claimed  for  the  engage- 
ments of  the  most  favored  countries.  Let  us  aban- 
don this  temporizing  policy,  this  galvanizing  of 
credit,  this  daily  appreciation  and  depreciation  of 
bonds  and  gold,  and  allow  them  to  vibrate  and  lluc- 


FLUCTUATIONS— THEIR   EFFECT.  51 

tuate  on  their  own  merits,  and  to  indicate  their  own 
worth  by  a  steady  stream  flowing  in  the  natural 
channel.  The  practice  of  throwing  on  the  market 
large  amounts  of  any  commodity,  and  retiring  secu- 
rities, can  have  no  other  effect  than  to  deter  capital 
from  seeking  investment  in  either,  whether  perma- 
nently or  temporarily,  in  a  legitimate  way  of  trade. 

All  operations  now  in  gold  or  bonds  are  as  hazard- 
ous as  are  the  chances  in  a  lottery  or  the  gambling- 
room.  Men  will  supply  only  their  pressing  wants, 
and  will  not  be  driven  into  the  whirlpool  of  specula- 
tion, if  they  are  seeking  a  sure  and  permanent  in- 
vestment. 

Although  they  may  neither  desire  nor  be  com- 
pelled to  sell,  they  are  unwilling  to  be  forced  daily 
to  change  the  valuation  of  their  investments.  When 
prices  are  down  temporarily,  they  must  estimate 
their  value  at  the  market  quotations.  The  timid 
man  is  inclined  to  part  with  his  investment,  and  the 
bold  one  is  not  disposed  to  increase  his;  conse- 
quently a  decline  ensues,  and  for  the  moment  the 
gambler  comes  in,  on  the  principle  of  "  make  a  spoon 
or  spoil  a  horn." 

I  am  well  aware  that  no  amount  of  argument  or 
evidence  can  stay  or  influence  a  panic.  Panics  are 
controlled  by  no  law,  and  must  be  left  to  exhaust 
themselves. 

Let  us  return  to  the  beginning, — the  effort  to 
economize  in  all  directions, — which,  after  all,  is  the 
point  of  accumulation.  Many  things  united  con- 
spire to  this.  The  cheapening  of  a  product  by  the 
introduction  of  new  machinery  not  only  redounds 


52  SCIENCE   OF  MONEY. 

to  the  interest  of  the  inventor  or  of  the  one  using  it, 
but  is  also  a  substantial  blessing  to  all  who  are  in 
any  way  connected  with  its  products.  To  throw  oft' 
this  expensive  medium  —  gold  —  and  substitute  a 
cheaper  one,  is  to  give  to  production  a  new  capital, 
and  also  to  cheapen  the  process  of  accumulation. 

A  country  will  become  rich  by  diminishing  its 
expenses  on  articles  of  luxury,  and  converting  the 
savings  into  reproduction  ;  it  can  never  do  so  by 
dissipation  and  extravagance. 

The  use  of  labor-saving  machinery  to  increase 
production  is  the  ultimate  end  of  all  effort.  It  is 
an  addition  to  enjoyment  without  a  new  expendi- 
ture,— an  increase  of  wealth,  and  not  of  value.  I 
prefer  an  increase  of  wealth  from  production,  to 
accumulation  from  parsimony.  The  one  adds  to  our 
enjoyments,  the  other  deprives  us  of  them. 

The  basis  of  all  credit  is  confidence.  This  can 
spring  only  from  ability,  as  I  have  already  said. 
Capitalists  are  not  likely  to  lend  money  to  a  coun- 
try whose  productions  exceed  but  little,  if  at  all,  its 
consumption,  whatever  its  past  accumulations  may 
have  been.  Without  an  annual  accumulation  and 
surplus  above  the  supply  necessary  to  a  continuance 
of  existence,  no  bolstering-up  of  public  or  private 
credit  can  or  will  last  long.  These  devices  and 
schemes  of  the  financier  will  soon  become  thread- 
bare, and  leave  the  nation  in  a  worse  condition.  In 
the  history  of  a  nation  it  sometimes  becomes  neces- 
sary to  make  use  of  an  expedient  for  self-preserva- 
tion. When  the  time  for  its  use  has  passed  away, 
it  is  equally  incumbent  to  spare  no  effort  of  economy 


FLUCTUATIONS— THEIR  EFFECT.  53 

and  stimulus  to  industry  and  enterprise,  in  order  to 
resuscitate  the  income  and  bring  it  up  to  the  annual 
expenditures.  And  if,  after  making  an  inventory 
of  the  ways  and  means,  it  is  found  that  the  accounts 
will  not  balance,  still  greater  economy  and  energy 
must  be  used. 

When  individuals  are  staggering  under  a  load  of 
debt,  they  are  willing  to  make  an  effort  at  throwing 
off  their  burden  and  arriving  at  better  fortune,  if  the 
way  be  pointed  out.  Nations  are  not  unlike  them, 
and  stand  doubting,  as  if  there  were  no  energy  in 
the  land, — waiting  for  the  word, — as  did  the  United 
States  when  Kossuth  appealed  to  it  for  men  and 
money.  Awhile  all  was  doubt,  until  the  orator, 
Henry  Clay,  spoke  the  word  non-intervention.  Not  a 
man  nor  a  dollar  could  then  be  had.  Give  to  the 
people  wise  and  just  laws  for  the  security  of  prop- 
erty and  the  protection  of  their  rights,  and  produc- 
tion will  soon  build  up  the  nation's  capital  and  credit. 
After  all,  money,  or  the  circulating  medium  of  a 
country,  is  not  so  necessary  to  its  welfare  as  is  the 
abundance  of  the  articles  it  will  buy.  Increase  the 
food,  clothing,  etc.  of  the  laborer,  and  reproduction 
will  go  on,  even  though  there  be  no  measure  of  value 
or  medium  of  exchange. 

The  circulating  medium  being  of  no  use  except 
as  a  meaus  for  the  exchange  of  productions,  it  be- 
comes valueless  when  there  are  none  to  barter.  Its 
office  is  then  suspended,  and  along  with  other  values 
it  will  be  depreciated.  This  will  continue  as  long  as 
there  is  a  dearth  of  commodities  or  capital.  Whilst 
man  has  any  wish  unsupplied,  there  will  be  a  de- 

5* 


54  SCIENCE   OF  MONEY. 

mancl  for  more  commodities.  So  long  as  he  has 
other  values  to  exchange  for  them,  the  demand  will 
be  legitimate  and  effectual.  Then,  and  not  before, 
will  he  call  to  his  aid  the  circulating  medium  or 
legal  tender.  It  is  auxiliary  to  man's  wants,  but 
otherwise  incapable  of  supplying  them.  Production 
exchanges  for  production,  but  requires  a  medium 
for  subdivision  and  distribution.  Money  in  use  is 
but  the  discoverer  of  the  surplus  of  others.  It  is 
the  pointer  that  finds  the  game  ;  success  or  failure 
in  securing  the  object  depends  upon  the  marksman. 
It  ministers  to  the  wants  of  speculation  and  produc- 
tion, in  looking  up  articles  necessary  to  their  wants, 
and  can  serve  no  other  end.  It  facilitates  the  ex- 
change of  all  products ;  and  if  transportation  has 
been  cheapened  and  expedited,  less  money  will  be 
required,  or  a  cheaper  rate  of  interest  will  be  sub- 
mitted to. 

On  the  other  hand,  if  discounts  or  loans  are 
needed,  is  it  not  far  better  that  the  government  should 
effect  them,  by  anticipating  the  maturity  of  a  bond, 
receiving  the  proceeds  in  a  uniform  legal  tender, 
than  to  be  subjected  to  the  uncertainty  of  obtaining 
them  from  a  private  bank,  to  the  depreciation  of 
their  notes  and  the  productions  at  the  same  time? 
The  legal  tender  can  never  fall  so  low  in  value  as 
any  other  promise  or  commodity.  It  is  the  desire 
to  liquidate  which  causes  an  extraordinary  demand 
for  the  legal  tender  as  a  circulating  medium.  Ca- 
lamines flow  from  this  want  of  a  certain  provision 
for  the  canceling  of  an  obligation  at  maturity.  But 
for  this  waiting   for  a  settling-up   of  transactions, 


FLUCTUATIONS— THEIR   EFFECT.  55 

productions  could  be  exchanged  for  productions,  or 
be  used  in  the  liquidation  of  debt. 

It  is  not  customary  in  commerce  to  draw  the  true 
line  between  the  legal  tender  of  a  country  and  the 
circulating  medium.     The  difference  is  as  great  as 
that  between  pork  and  flour ;  one  may  be  used  in 
the  absence  of  the  other,  and  sustain  life.     The  cir- 
culating medium  is  useful  only  in  the  exchange  of 
commodities,  the  legal  tender  in  the  liquidation  of 
debt  or  balances  due  on  account.  Withdraw  the  legal 
tenders,  and  the  circulation  of  values  will  cease,  ex- 
cept at  a  sacrifice  in  liquidation  of  obligation.     So 
soon  as  they  are  canceled,  a  system  of  barter  on  the 
basis  of  supply  and  demand  will  be  inaugurated; 
life  will  still  be  sustained,  but  it  will  be  by  the  use 
of  a  very  coarse  bread.     It  is  not  the  rude  state  of 
savage  life,  that  knows  nothing  but  barter,  that  I 
wish  to  see  inaugurated ;  it  is  the  adoption  of  a  legal 
tender  and  medium  of  exchange  indigenous  to  the 
country, — one  that  shall  remain  and  be  as  constant 
as  our  capital  stock  and  fixtures  in  trade,  firm  as  the 
land  we  till,  as  fixed  as  the  promises  of  the  govern- 
ment to  pay  a  four  per  cent,  semi-annual  annuity. 
The  leo;al  tender  will  then  be  consistent  with  the 
life  of  production,  and  will  liquidate  at  all  times  pre- 
cisely the  amount  of  debt  that  it  can  command  of 
commodities.     When  brought  down  to  this  point, 
all  men's  chances  of  profit  will  be  alike ;  and  when 
there  is  a  depreciation  in  values  below  the  cost  of 
production  or  natural  price,  the  legal  tenders  will 
depreciate  to  the  same  extent.     The  losses  incident 
to  all  investments  will  then  rest  on  the  same  foun- 


56  SCIENCE  GF  MONEY. 

dation.  One  species  of  value  will  not  have  to  pay  a 
premium  iu  order  to  create  a  sinking-fund  to  repair 
the  losses  incident  to  another.  If  capital  seeks  an 
investment  in  legal  tenders,  or  the  promise  of  them, 
in  exchange  for  machinery  or  implements  of  produc- 
tion, and  they  should  fail  in  giving  a  natural 
increase,  from  the  want  of  which  depreciation 
must  follow,  why  should  not  a  due  share  of  these 
misfortunes  attend  the  legal  tenders?  or  why  should 
they  be  called  on,  in  addition  to  their  own  wants,  to 
guarantee  a  never-changing  legal  tender,  if  it  is  of 
gold?  Production  never  shares  the  profit,  but  is 
always  required  to  make  good  the  losses  incident  to 
its  absence,  when  called  for  to  liquidate.  The  chances 
are  decidedly  in  favor  of  uniformity  in  the  legal 
tenders  of  a  country  if  used  only  as  a  circulating 
medium  as  demanded  by  the  producers.  This  can- 
not be  the  case  if  gold,  an  article  of  merchandise, 
be  used  in  the  same  capacity.  The  production  and 
consumption  of  a  country  demand  and  create  the 
one  at  the  instant  of  want;  the  other  is  subject  to 
all  the  delays  and  losses  incident  to  its  use  by  all  other 
countries  as  a  medium  and  le^al  tender.  To  com- 
mand  it  at  all  times,  even  after  submitting  to  the 
delays,  you  must  offer  an  inducement,  or  sacrifice 
your  values  in  exchange,  if  for  no  other  reason  than 
that  of  the  sacrifice  of  their  values  by  its  withdrawal. 
It  would  never  be  parted  with  if  what  we  offered  in 
exchange  was  not  of  more  value  to  the  buyer  than 
the  gold.  Now,  if  we  should  happen  to  be  greatly 
in  want  of  gold,  and  the  countries  with  which  we 
are  offering  exchanges  of  surplus  should  be  equally 


BILLS   OF  EXCHANGE— MODERN    USE.  57 

in  need,  we  would  have  to  make  an  immense  sacrifice 
to  obtain  it.  Not  so  in  case  of  a  legal  tender  such 
as  I  have  indicated,  other  than  gold.  The  wants  of 
all  other  countries  for  a  circulating  medium  will 
not  complicate  our  own  misfortune.  Our  yard-stick 
will  be  at  all  times  three  feet  long,  and  at  hand  to 
measure  values  or  liquidate  debt. 


BILLS  OP  EXCHANGE-MODERN  USE. 

The  purpose  and  aid  to  commerce  of  bills  of  ex- 
change have  been  fully  discussed  by  political  econ- 
omists, so  far  as  concerns  their  application  to  the 
transfer  of  balances  between  distant  points,  thereby 
saving  transportation  and  loss  of  time  in  effecting 
payments.  I  shall  endeavor  to  explain  the  modern 
uses  of  them,  and  how  far  they  exceed  in  magnitude 
all  that  has  ever  been  claimed  for  them. 

They  are  now  the  great  motive  power  in  effecting 
a  circulation  of  all  the  values  of  distant  and  round- 
about commerce.  In  fact,  they  play  the  same  part 
in  the  distribution  of  the  surplus  of  nations  that  the 
locomotive  performs  to  its  train  of  cars  ;  their  track 
is  over  mountains  and  deserts,  thev  run  all  grades, 
make  all  curves,  stop  at  all  way-stations,  and  run 
through  lightning  expresses  without  change  of  cars  ; 
and,  to  make  the  comparison  still  more  complete, 
they  have  their  times  of  accident  and  disaster.  A 
few  illustrations  from  every-day  life  will,  I  hope, 


58  SCIENCE   OF  MONEY. 

give  to  the  uninitiated  a  clear  view  of  the  important 
part  performed  by  bills  of  exchange  in  all  the  ram- 
ifications of  production  and  consumption.  Were 
they  withdrawn  from  the  commerce  of  the  world, 
and  all  the  transactions  in  commodities  footed  up  in 
gold,  one-fifth  of  all  its  shipping  and  transportation 
would  be  occupied  in  effecting  the  exchange  and 
adjusting  the  differences. 

Many  without  thought,  and  others  even  after  re- 
flecting upon  the  matter,  are  of  the  opinion  that 
money  is  used  in  the  purchase  of  our  produce,  that 
it  is  sent  here  by  the  buyer  to  pay  for  it  on  delivery. 
A  greater  mistake  was  never  made.  Not  one  dollar 
in  one  hundred  thousand  in  gold  is  sent  with  the 
orders  for  our  produce.  All  this  will  more  fully 
appear  as  I  advance  in  the  elucidation  of  my  sub- 
ject. 

"When  the  spinner  at  Manchester  wants  or  thinks 
he  will  need  our  cotton,  he  usually  obtains  a  bank- 
er's credit,  which  he  remits  to  his  correspondent  at 
New  Orleans,  with  instructions  to  purchase  for  him, 
say  five  thousand  bales  of  cotton  if  middling  grade 
can  be  delivered  in  Liverpool  at  thirty  cents  per 
pound,  gold,  directing  him  at  the  same  time  to  make 
his  bills  on  the  letter  of  credit  at  sixty  days  after 
sight  and  sell  the  same  to  any  banker  having  the 
money.  Before  this  order  can  be  executed,  the 
buyer  must  ascertain  the  rate  of  discount  for  his 
sixty-day  bills,  the  rate  of  freight  to  Liverpool,  local 
expenses,  such  as  drayage,  etc.,  his  own  commis- 
sions, classing,  marking,  and  shipping,  and  then  the 
price  of  cotton  in  the  home  market.    All  these  items 


BILLS   OF  EXCHANGE— MODERN   USE.  59 

together  will  tell  him  whether  he  can  fill  the  order. 
If  not,  he  must  await  a  decline  either  in  the  cotton 
or  in  some  of  the  charges. 

All  the  charges  enumerated  above  come  off  the 
producer.  And  yet  he  has  no  farther  interest  in 
the  matter.  It  is  nothing  to  him  whether  the  cotton 
be  paid  for  in  gold  or  calico.  He  has  received  from 
his  factor  what  he  wants,  something  with  which  to 
pay  taxes  and  debts,  or  to  reinvest.  I  started  this 
explanation  with  a  letter  of  credit  by  means  of  which 
the  cotton  was  purchased  at  sixty  days.  You  will  ask 
whence  the  banker  got  the  money  to  pay  for  the 
sterling  bill  which  was  given  on  the  letter  of  credit. 
He  at  once  remits  it  to  New  York  or  London  to  his 
credit.  The  planter  pays  his  debt  to  his  country 
merchant,  the  country  merchant  pays  his  to  the  im- 
porter of  the  goods,  and  the  importer  or  wholesale 
merchant  in  New  Orleans  goes  to  the  banking-house 
and  buys  a  bill  of  exchange  on  London  or  New  York, 
which  he  sends  to  the  manufacturer  in  payment  of 
his  debt  or  for  the  purchase  of  goods.  Perhaps  by 
the  time  this  last  bill  on  London  is  paid  by  the  agent 
he  has  collected  not  only  the  sterling  bill  drawn 
against  the  cotton,  but  has  purchased  of  the  Man- 
chester manufacturer  a  bill  drawn  on  the  New  Or- 
leans importer  for  payment  of  calicoes  manufactured 
from  this  very  five  thousand  bales  of  cotton.  All  of 
these  transactions  were  effected  without  the  inter- 
vention of  gold. 

Now,  often  this  letter  of  credit  and  the  authority 
to  purchase  produce  are  sent  with  what  are  called 
discretionary  orders,  and  are  frequently  coupled  with 


60  SCIENCE   OF  MONEY. 

the  injunction  that  the  agent  or  buyer  in  New  Or- 
leans must  take  one-fourth  or  one-eighth  interest  in 
the  profit  or  loss  of  the  cotton  when  sold  in  Liver- 
pool. This  is  done  to  secure  caution  in  filling  the 
order.  Or  it  may  be  from  a  joint  speculator  in 
Liverpool,  whose  intention  is  to  sell  again  to  the 
spinner  in  Manchester. 

I  will  °;ive  one  more  illustration  of  a  roundabout 
bill  of  exchange. 

A  New  Orleans  speculator  or  importer  of  coffee 
obtains  a  letter  of  credit  from  a  London  banker, 
and  sends  it  to  Rio,  on  which  bills  at  sixty  days' 
sight  are  sold  and  the  proceeds  are  invested  in  a 
cargo  of  coffee.  When  landed  at  New  Orleans,  the 
coffee  is  sold,  and  the  proceeds  are  invested  in  a 
banker's  bill  and  remitted  to  London  to  cover  the 
sixty-day  bill  drawn  at  Rio.  Or  this  New  Orleans 
coffee  operator  may  invest  the  money  in  cotton  for 
account  of  the  banker  who  gave  the  credit  on  Rio. 
In  this  way  all  parties  are  endeavoring  to  make  a 
profit  or  commission  from  London  via  Rio  and  New 
Orleans. 

Now,  it  is  frequently  the  case,  where  parties  have 
not  the  highest  credit,  that  none  of  the  above  credits 
can  be  used  except  the  cotton  or  coffee  is  consigned 
to  the  order  of  the  banker  or  parties  purchasing  the 
bill  of  exchange.  In  the  latter  case  they  are  called 
bills  of  lading  exchange,  and  never  sell  at  so  high  a 
rate,  on  account  of  the  extra  trouble  of  watching  the 
transformations  of  the  produce  on  which  they  are 
based.  There  is  one  observation  I  wish  to  make 
here,  bearing  particularly  on  the  present  course  or 


BILLS   OF  EXCHANGE— MODERN   USE.  Q\ 

system  of  exchanges.  It  is  onerous  to  all  growers 
of  raw  produce,  and  not  so  to  the  manufacturer, 
because  all  raw  produce  is  taxed  with  the  ruling 
rate  of  discount  for  sixty-day  bills  at  the  time  of 
sale;  in  a  word,  all  is  sold  on  time,  or,  what  is 
equivalent  to  it,  as  much  less  is  paid  for  the  produce 
before  it  can  be  sold  as  amounts  to 'the  discount  on 
a  sixty-day  bill.  The  producer  is  forced  not  only 
to  pay  this  discount,  but  he  has  to  pay  all  charges 
of  extra  discount  or  premium  for  the  discredit  that 
may  attend  the  sale  of  time  bills,  which  is  sometimes 
produced  by  a  tendency  to  overtrade,  or  feverishness, 
that  may  influence  capitalists. 

It  would  seem  as  if  there  should  be  some  compen- 
sation arising  from  this  loss  in  some  way;  but  such 
is  not  the  case.  If  our  importing  merchants  were 
allowed  a  corresponding  credit  on  the  manufactured 
goods,  it  would  be  some  set-oft';  but  instead  of  this 
they  are  required  to  deposit  funds  in  advance,  or  a 
banker's  credit,  which  amounts  to  the  same,  before 
the  manufacturer  will  agree  to  execute  their  order. 
This,  and  the  credit  given  them  on  the  raw  produce, 
frequently  give  ample  time  to  work  it  up  and  fill 
the  order. 

From  the  above  explanations  in  regard  to  bills  of 
exchange  and  how  they  are  used,  and  the  immense 
part  they  play  in  the  commercial  affairs  of  the  world, 
the  natural  inference  is,  that  the  speculator  in  pro- 
duce and  the  dealer  in  bills  of  exchange  are  not  one 
and  the  same  individual.  The  buyers  of  produce  on 
credits,  or  otherwise,  are  nothing  more  than  drawers 
and  sellers  of  bills  based  on   the  produce  bought. 

6 


62  SCIENCE  OF  MONEY. 

To  this  there  are  a  few  exceptions.  The  business 
has  now  grown  to  such  magnitude  that  it  is  found 
most  profitable  to  confine  the  dealing  in  bills  to  the 
banker  and  capitalist, — this  being  their  business, 
they  are  better  informed  as  to  the  degree  of  credit 
to  be  given  to  the  parties  drawing  bills  against  pro- 
duce. It  is  to  them  that  all  countries  are  indebted 
for  the  supply  of  gold  and  its  general  distribution 
over  the  world.  They  endeavor  to  keep  all  their 
money  employed  and  paying  interest,  with  the 
exception  of  that  portion  held  in  reserve. 

If  the  current  rate  of  interest  in  London  be  three 
per  cent,  per  annum,  and  these  large  banking-houses 
find,  from  a  want  of  money  in  New  York  or  New 
Orleans,  that  they  can  purchase  sixty-day  sterling 
bills  at  a  discount  of  three,  four,  or  six  per  cent., 
they  will  not  send  the  means  to  buy,  thereby  real- 
izing in  sixty  or  ninety  days  from  nine  to  twelve 
months'  interest.  I  have  seen  buyers  of  bills  in  New 
Orleans  so  short  of  money  that  eighty-two  dollars 
would  purchase  one  hundred  and  nine  dollars  in 
Liverpool;  and  I  have  seen  checks  on  New  York, 
drawn  by  dealers  of  the  highest  credit,  sold  in  New 
Orleans  at  ninety-four  dollars  for  one  hundred  dollars, 
and  sixty-day  bills  at  from  ninety  to  ninety-two  dol- 
lars. The  parties  drawing  them  stood  so  high  in  the 
New  York  markets  that  the  notes  were  discounted  at 
the  rate  of  six  per  cent,  per  annum, — ample  evidence 
that  the  low  rate  was  not  from  want  of  confidence, 
but  from  the  great  scarcity  of  money, — and  in  a  few 
weeks,  so  soon  as  gold  could  be  had  from  Europe, 
the  same  bills  commanded  a  premium. 


BILLS   OF  EXCHANGE— MODERN   USE.  63 

In  speaking  of  this  sale  of  raw  produce  on  time,  and 
the  purchase  of  manufactured  articles  for  cash,  I  am 
reminded  forcibly  of  a  letter  which  an  old-time  mer- 
chant of  N"ew  Orleans  received  from  a  new  corre- 
spondent on  the  Mississippi  River,  requesting  an 
invoice  of  sugar,  coffee,  and  supplies,  and  stating  that 
cotton  would  be  forwarded  by  return  of  boat  to  pay 
him.     He  replied, — 

"My  dear  Sir: — You  begin  at  the  wrong  end  of 
the  line.  Send  forward  the  cotton,  and  the  supplies 
will  go  by  return  boat." 

Now,  could  the  raw  produce  and  the  manufac- 
tured articles  meet  in  mid-ocean,  it  would  be  only 
fair.  Each  party  would  have  its  own  fluctuations  to 
pay  for.  The  only  remedy — and  that  is  but  partial 
— is  a  cash  business  all  around,  or  as  near  it  as  the 
transactions  can  be  brought.  In  the  language  of 
Father  Jones,  when  Simon  Suggs  gave  in  his  expe- 
rience, and  spoke  of  wrestling  with  the  serpent, 
I've  been  all  along  thar. 


64  SCIENCE   OF  MONEY. 


BALANCE  OP  TKADE. 

In  this  connection  I  will  notice  a  prevalent  fallacy 
not  only  influencing  the  majority  of  individuals,  but 
our  national  counsels.  It  is  the  much-talked-of  influ- 
ence of  the  balance  of  trade, — that  it  is  favorable 
when  it  indicates  more  exports  than  imports,  when 
nine  times  out  of  ten  the  reverse  is  what  indicates 
prosperity  and  thrift.  If  A  purchases  in  New  Orleans 
one  hundred  thousand  dollars'  worth  of  cotton, 
and  exports  it  to  England,  the  entry  on  our  custom- 
house books  will  be  no  more  than  this  sum.  "When 
it  arrives  at  Liverpool,  many  charges,  such  as  freight, 
insurance,  commission,  etc.,  have  been  added,  and, 
it  is  to  be  presumed,  the  usual  profit ;  if  this  did  not 
appear,  A  could  not  live  and  prosper.  Suppose  all 
these  charges  amount  to  ten  per  cent.,  which  is 
hardly  the  average ;  now  this  credit  represents  in 
Liverpool  one  hundred  and  ten  thousand  dollars, 
and  will  be  invested  in  a  return  cargo  of  calico, 
etc.,  which,  at  the  invoice  cost,  will  appear  as  an 
import  at  our  custom-house  for  a  like  sum,  and  in 
the  estimates  of  exports  and  imports  will  indicate 
a  balance  of  ten  thousand  dollars  against  us,  when, 
in  fact,  it  is  so  much  gain  by  our  merchant,  the 
true  measure  of  which,  the  exchange  or  price  of 
bills,  will  show  no  variation,  and  often,  when  the 
exchanges  are  favorable  or  unfavorable,  the  indica- 
tion is  only  a  desire  on  the  part  of  one  country  to 


BALANCE   OF  TRADE.  65 

speculate  in  the  other's  goods.     This  will   induce 
greater  fluctuations  and  sharper  competition  than 
ever  attend  the  liquidation  of  balances.     The  losses 
on  the  speculation,  being  often  confined  to  parties 
unable  to  foot  them,  can  cause  no  demand  for  ex- 
change to  cover  the  same,  but  must  lie  over  to  a 
more   favorable   season  of  speculation.      The   real 
capitalist   in  the   trade  asks  but  little  credit;  the 
speculator   cannot  get  it.     The   prudent   capitalist 
will  not  import  long  if  there  is  not  a  demand  for  his 
goods,  and  this  is  generally  the  case  when  his  cus- 
tomers have  nothing  to  export;  if  they  have  nothing 
to  sell,  they  cannot  buy.     There  is  no  greater  fallacy 
than  the  prevalent  idea  that  there  is  an  unlimited 
credit    between    the    exporter    and    the    importer. 
Should  this  to  a  certain  extent  be  the  case  with  a 
small  portion  of  those  engaged  in  the  trade,  it  is  to 
be  presumed  that  if  they  know  how  to  get  into  debt 
they  will  find  a  way  to  get  out.    And  why  the  coun- 
try that  never  pays  one  dollar  of  the  losses  should 
trouble  herself  continually  as  to  the  balance  of  trade 
when  unfavorable, — when,  in  fact,  it  only  indicates 
consumption  beyond  production,  and  will  check  it- 
self and  allow  production  to  show  an  excess  over 
consumption, — is  difficult  to  comprehend.    The  true 
policy,  and  the  only  effective  one,  is  to  encourage 
industry  and  economy;   the  balance  of  trade  will 
take   care    of  itself.      Individual   speculators   may 
have  an  unfavorable  balance.     To  charge  the  col- 
lective commerce  of  a  country  with  it  is  derogatory 
to  the  character  of  its  mercantile  intelligence.    If 
a  man   exchanges  one   hundred   dollars'    worth   of 

6* 


QQ  SCIENCE   OF  MONEY. 

gold  for  one  hundred  and  ten  dollars'  worth  of  flour, 
the  balance  of  trade  is  certainly  not  against  him, 
while  he  is  in  the  enjoyment  of  the  difference  in 
the  exchange. 


APPLICATION. 


I  shall  now  proceed  to  sum  up  the  foregoing 
arguments  and  reasons  for  a  divorcement  of  gold 
from  the  circulating  medium  of  our  country,  on  the 
score  of  its  fluctuations  and  unreliableness  as  a 
measure  of  value,  from  the  fact  that  we  are  attempt- 
ing to  make  it  perform  two  offices,  when  the  demand 
for  it  as  a  circulating  medium  by  those  who  have  it 
not,  will  or  may  be  so  intense  as  to  incapacitate  it 
for  the  moment  as  a  correct  measure  of  value  for 
all  other  merchandise,  or  the  liquidation  of  debt 
incurred  with  a  view  to  its  unchangeableness. 

The  greatest  difficulty  in  its  use  as  a  medium  or 
as  legal  tenders,  is  its  absence  when  we  want  it,  from 
the  fact  that  other  countries  are  using  it  in  the 
same  capacity  at  the  same  moment,  and  in  order  to 
attract  it  we  must  make  sacrifices  by  forced  sale  of 
our  substance  in  order  to  cover  pressing  wants. 

Now,  on  the  other  hand,  if  we  discard  it  as  a 
legal  tender  in  our  own  internal  exchanges,  and  per- 
petuate the  use  of  our  present  legal  tenders,  we  will 
be  at  all  times  able  to  command  them  when  we  have 
arge  productions  or  values  to  offer,  without  the  de- 


APPLICA  TION.  07 

preciation  of  our  property  while  waiting  for  the 
measure  of  value  to  be  sent  us  from  abroad.  Our 
productions  will  still  be  the  same,  the  medium  or 
money  of  account  can  neither  add  to  nor  diminish 
quantity, — the  producer  will  be  left  in  the  precise 
position  he  would  have  been  in  the  liquidation  of 
debts  predicated  on  the  future,  that  he  would  be 
if  the  promise  had  been  to  pay  one  bale  of  cotton 
or  a  barrel  of  mess -pork,  and  not  be  taxed  with 
the  rise  and  fall  of  any  commodity  other  than  the 
one  he  undertook  to  produce, — the  proceeds  of 
which  were  intended  to  cancel  his  obligation,  to 
work  out  this  relief;  and  to  rid  the  producer  of  all 
risks  not  incident  to  his  business  by  making  his 
legal  tenders  such  as  will  not  be  in  demand  by  the 
Chinese,  and  beyond  his  reach  when  in  demand,  is 
certainly  a  great  step  to  reproduction  and  incentive 
to  renewed  energies.  He  will  not  fail  to  produce 
when  the  depressing  influence  of  exchanging  one 
commodity  for  another — in  order  to  make  good  a 
maturing  obligation — has  been  removed. 

This  is  the  individual  saving  and  view  of*  the 
subject.  The  public  gain  is  still  greater,  not  only 
from  their  enhanced  ability  to  pay  taxes,  but  from 
the  speedy  lessening  of  the  country's  obligations, 
which  of  itself  is  adding  to  reproduction  by  the  re- 
duction of  taxes. 

Now,  if  there  is  a  steady  application  of  the  avail- 
able gold  of  the  country,  together  with  all  that  must 
be  taken  up  on  a  four  per  cent,  loan,  to  the  payment 
of  the  onerous  six  per  cent,  debt,  the  credit  of  the 
new  loan  must  appreciate,  even  should  nothing  more 


68  SCIENCE   OF  MONEY. 

than  the  four  per  cent,  loan  be  applied.  The  reduc- 
tion of  the  debt  will  be  fifty  per  cent.  If  one  hun- 
dred and  fifty  millions  be  now  required  to  pay  the 
interest  on  a  six  per  cent,  loan,  one  hundred  millions 
will  pay  it  on  a  four  per  cent.  debt.  This  certainly 
will  be  a  great  step  in  advance  towards  the  liquida- 
tion of  our  large  debt,  and  will  place  it  on  a  par  with 
sold,  on  the  basis  of  the  most  favorable  nations. 
Favorable  as  this  view  may  be,  it  does  not  express 
one-half  of  the  saving  or  absolute  benefit  derived  by 
the  government  and  people.  Should  the  reduction 
steadily  continue,  by  the  payment  of  bonds,  it  will 
not  be  a  great  while — less  than  twenty  years,  indeed 
— before  the  immense  and  growing  productions  and 
commerce  of  the  great  centers  of  our  country  will 
demand  and  require  a  legal -tender  circulating 
medium  equal  to  the  balance  of  our  debt.  There 
is  a  point  where  the  two  processes  must  meet.  Ab- 
sorption of  the  bonds  by  the  requirements  of  a  cir- 
culating medium,  and  actual  payment  on  the  other 
hand,  are  sure  to  come  together.  Suppose  the  point 
to  be  fifteen  hundred  millions  of  dollars.  This 
country  will  then  be  out  of  debt  and  free  from  the 
assessment  of  taxes  to  pay  interest;  for  how  can  the 
legal-tender  circulation  of  the  country  be  converted 
into  interest-paying  bonds  when  the  absolute  wants 
of  production  and  commerce  demand  a  circulating 
medium  equal  to  fifteen  hundred  millions  of  dollars? 
No  power  is  likely  to  deprive  them  of  it.  The  de- 
mands of  production  and  commerce  are  much  more 
quickening  than  the  slow  accumulation  of  parsimony. 
Interest  being  the  measure  of  debt,  and  the  fifteen 


APPLICATION.  69 

hundred  millions  of  dollars  paying  no  interest,  it 
will  be  no  longer  necessary  to  levy  taxes  annually 
to  meet  it.  So  far  as  the  government  is  concerned, 
the  debt  will  be  paid,  as  it  will  all  be  in  the  hands 
of  its  people.  Every  one  of  them  using  the  circu- 
lating legal-tender  medium  will  carry  his  own  share 
of  interest.  The  circulating:  medium  will  then  be 
truly  a  great  mutual  benefit  association  for  the  pro- 
tection of  all.  The  fortunate  holders  will  bear  the 
losses  of  those  who  are  so  unfortunate  as  to  have 
nothing:  to  offer  in  exchang;e.  The  accumulated 
premiums  are  the  lessening  of  taxes,  all  of  which 
will  be  annually  divided  out  in  legal  tenders,  and 
not  in  scrip  of  indebtedness  or  bonds. 

The  conclusion  I  make  from  the  foregoing  is,  the 
practicability  of  the  payment  and  liquidation  of 
the  entire  debt — twenty-five  hundred  millions  of 
dollars — before  its  maturity,  with  the  payment  of 
only  six  per  cent,  interest  per  annum,  or  one  hun- 
dred and  fifty  millions  of  dollars.  The  reduction  this 
will  make  on  the  one  hand,  and  the  absorption  into 
legal  tenders  on  the  other,  will  soon  create  a  credit 
equal  to  a  four  per  cent,  annuity  or  loan,  and  all 
combined  will  bring  the  extinguishment  in  less  than 
twenty-five  years,  and  give  to  the  country  a  uniform 
currency  and  legal  tenders.  The  plans  to  secure  this 
desirable  end  can  easily  be  given. 


70  SCIENCE   OF  MONEY. 


CONSOLATION. 


Amidst  all  the  disasters  and  sacrifices  which  the 
late  war  involved,  almost  the  entire  amount  of  the 
immense  capital  required  to  carry  it  on  was  produced 
by  the  country.  The  amount  loaned  or  furnished  by 
other  countries  would  not  have  defrayed  the  expenses 
of  one  campaign.  This  large  sum  loaned  to  the  gov- 
ernment by  its  people  was  produced  by  them  under 
all  the  disadvantageous  circumstances  of  the  with- 
drawal from  the  legitimate  labor  of  production  of 
over  one  million  of  men.  If  we  could  sustain  this 
large  consumption  during  the  four  years  of  the  con- 
flict, aud  come  out  of  it  with  ample  means  to  prose- 
cute other  and  more  profitable,  but  quite  as  gigantic 
enterprises,  coupled  with  increased  production,  it 
certainly  should  console  us  under  the  burden  of  debt, 
especially  when  it  represents  so  small  a  portion 
of  the  values  consumed,  the  balance  having  been 
contributed  each  year  in  the  shape  of  taxes.  Now, 
if  energy  and  enterprise  can  create  and  spare,  with- 
out impairing  production,  five  thousand  millions  in 
four  years,  how  long  a  time  will  it  require  the  same 
people,  under  increased  facilities,  to  cancel  one-half 
the  sum  by  the  savings  from  their  surplus  ?  It  cer- 
tainly will  be  but  a  very  small  percentage  if  gathered 
from  twenty  years.  "When  we  think  of  these  immense 
sums,  and  of  the  Shortness  of  the  time  which  was 
allowed  for  their  creation,  we  cannot  be  otherwise 
than  thankful  to  the  Giver  of  all  good  for  so  prolific 


LEGAL    TENDER.  71 

a  country.  It  is  a  fortunate  producing  country  that 
can  add  to  its  capital  stock  ten  per  cent,  per  annum 
over  consumption,  but  how  much  more  fortunate  is 
the  land  that  can  not  only  lay  up  this  percentage, 
but  can  loan  and  contribute  to  its  government  one 
thousand  millions  annually,  and  a  million  of  soldiers 
to  fight  her  battles ! 


LEGAL  TENDEK. 


To  give  paper  money  currency  at  par  with  gold, 
is  to  limit  the  supply  to  the  wants  of  a  circulating 
medium.  To  effect  this,  the  power  to  issue  only  in 
exchange  for  bonds  will  not  inflate  the  market.  It 
is  not  reasonable  to  suppose  that  the  holder  of  bonds 
will  go  out  of  them  into  any  money  or  other  com- 
modity the  tendency  of  which  is  toward  deprecia- 
tion. If,  on  the  other  hand,  he  feels  impressed  that 
there  is  a  redundancy  of  money,  so  far  from  convert- 
ing bonds  into  legal  tenders,  he  will  convert  his  legal 
tenders  into  bonds.  In  this  way  the  equilibrium  will 
be  preserved  without  the  continual  influences  sur- 
rounding the  issue  of  paper  money  generally.  The 
government,  issuing  legal  tenders  only  for  the  benefit 
of  its  people,  will  have  ho  inducement  to  increase  the 
issue,  knowing  that  all  beyond  the  amount  neces- 
sary to  form  a  circulating  medium  will  return  to  be 
invested  in  bonds.  This  will  b^the  national  ba- 
rometer, indicating  the  rise  and  fall  in  the  circulating 
medium  of  the  country  with  as  much  certainty  as 


72  SCIENCE   OF  MONEY. 

the  rise  and  fall  in  exchange  show  the  state  of  the 
debits  and  credits  of  one  country  with  another. 

The  loss  to  the  individual  holder  of  legal  tenders 
when  the  market  is  overstocked  with  them  will  be 
to  the  extent  to  which  they  would  have  accumulated 
while  in  his  possession  with  no  commodity  for  which 
to  exchange  them  indicating  a  future  profit. 

It  is  to  be  presumed  that  the  holders  of  legal 
teuders  will  fully  understand  the  difference  between 
them  and  government  notes  bearing  interest,  and 
that,  in  looking  round  for  an  investment  when  the 
circulating  medium  is  no  longer  profitable,  they  will 
naturally  turn  to  bonds.  This  facility  of  earning 
an  interest  on  the  small  individual  surplus  of  the 
country  will  induce  habits  of  economy  in  all  classes, 
not  only  in  the  consuming  but  in  the  producing. 

Nothing  tends  so  greatly  to  the  growth  and  in- 
ternal prosperity  of  a  country  as  the  formation  of 
such  habits;  the  very  savings  will  induce  further 
production,  in  order  to,  as  it  were,  compound 
them. 

It  is  unjust  and  illiberal  toward  the  producing  por- 
tion of  the  country  to  tax  it  with  the  whims  of  the 
miser  or  the  wild  schemes  of  the  speculator,  in  order 
to  make  the  circulating  medium  of  a  country  not 
only  secure  but  unchangeable  in  itself  when  com- 
pared with  all  other  productions  of  value. 

If  the  miser  wishes  to  hoard  his  savings  and  lock 
them  up  from  the  use  of  commerce  or  reproduction, 
it  is  not  to  the  great  productive  interest  of  the 
country  to  pay  him  a  bounty  in  the  shape  of  extra 
security  of  unchangeableness,  in  order  to  retard  the 


LEGAL    TENDER.  73 

general  progress  of  society  in  the  accumulation  of 
something  further  for  consumption. 

It  is  not  the  miser  who  builds  up  a  country.  He 
hoards  his  earnings,  and  whilst  so  withdrawn  from 
the  world  they  are  as  dead  and  unproductive  as  if 
cast  into  the  sea.  The  prosperity  of  a  country  con- 
sists in  its  production  and  consumption,  and  not  in 
a  destruction  of  values  by  hoarding  them  up  after 
the  manner  of  Captain  Kidd. 

The  accumulation  of  values  not  used  in  liquida- 
tion and  not  liable  to  decay  is  well  enough  in  its 
way,  but  is  admissible  only  when  the  productive 
energies  of  a  country  have  been  pushed  to  their 
utmost  capacity.  Opulence,  dissipation,  and  decay 
will  follow, — in  a  word,  a  country  then  begins  to 
live  on  its  seed-corn. 

To  stimulate  the  merchant  and  the  man  of  com- 
merce by  fair  laws  and  wise  and  just  regulations,  is 
the  duty  of  eveiy  country  which  has  increasing 
desires  and  wants  to  be  supplied ;  but  to  insist  that 
production  should  guarantee  that  any  one  com- 
modity should  remain  invariable,  and  be  at  all  times 
exchangeable  for  a  like  quantity  of  other  products 
of  value,  is  unreasonable.  It  would  be  more  honor- 
able to  guarantee  to  the  producer  a  uniform  price  or 
exchange  for  his  surplus.  It  is  not  to  be  supposed 
that  he  is  thoroughly  conversant  with  values  and 
the  many  changes  continually  affecting  commodities. 
He  is  not  on  the  watch-tower,  and  must  rely  on  the 
honesty  not  less  than  on  the  wisdom  of  the  trader 
for  his  knowledge  of  the  condition  of  markets, — 
where  there  is  a  glut,  and  where  a  scarcity  can  be 

7 


74  SCIENCE   OF  MONEY. 

found  for  his  surplus.  The  circulating  medium  of 
a  country,  if  legal  tenders,  measures  the  value  of 
all  commodities;  from  this  comes  its  use  as  money, 
and  as  a  security  it  is  a  tacit  mortgage  not  only  on 
production  but  on  all  the  capital-stock,  lands,  and 
tenements  of  its  people.  It  is  unlike  the  bonds  of 
the  nation,  which  are  payable  at  a  distant  period, 
and  bear  only  on  surplus  production.  When  this 
fails,  not  only  does  the  interest  cease,  but  the  bond 
has  no  security  and  becomes  worthless  ;  for  how  can 
unproductive  property,  or  such  as  produces  only 
maintenance  of  its  occupants,  be  considered  secu- 
rity? All  property  is  measured  in  value  by  the 
annual  income. 


WHO  PAYS  THE  EXPENSE  AND  CHARGES  OP  A 

MEDIUM. 

It  is  well  known  that  gold,  like  all  other  com- 
modities, is  continually  seeking  the  country  that  is 
willing  to  pay  the  highest  price  for  it.  No  country 
in  want  of  it  can  command  it  without  valuable 
commodities,  and  not  even  then  without  offering: 
to  a  certain  extent  to  sacrifice  them;  when  it  has 
been  obtained,  at  whatever  cost,  the  gold  is  only, 
after  all,  a  legal  tender  in  the  payment  of  debt, 
and  will  not  afterwards  command  any  of  the  con. 
veniences  and  necessaries  of  life,  any  more  than  it 
would  have  done  had  this  sacrifice  not  been  made 
to  procure  it  as  a  legal  tender,  which  might  serve 


WHO   PAYS   THE  EXPENSE  AND    CHARGES.       75 

as  a  medium  of  exchange,  to  effect  the  sale  and  trans- 
fer of  domestic  products,  many  devices  could  have 
"been  resorted  to  before  submitting  to  this  loss,  inci- 
dent to  the  providing  of  a  legal  tender.  Any  kind 
of  counters  would  have  been  used,  such  as  checks, 
bank-notes,  or  open  credits,  and  the  transfer  of  val- 
uables. Every  market-town  would  be  a  clearing- 
house for  the  surrounding  country,  and  cause  the 
debits  and  credits  of  each  producer  to  be  liquidated. 
After  all  that  can  be  said  or  done,  the  histoiy  of 
production  and  consumption  is  but  book-keeping 
by  double  entry :  whenever  a  credit  is  given  a  debit 
must  be  made;  whatever  comes  in  is  debtor  to  that 
which  goes  out;  when  you  compare  the  debit  side 
with  the  credit,  and  find  them  equal,  you  feel  con- 
fident the  postings  have  been  made  correctly.  Now, 
if  you  will  examine  the  balance-sheet  carefully  as 
you  close  up  the  accounts  by  profit  and  loss,  you  will 
find  the  heaviest  charge  is  for  legal  tender,  and  that 
the  export  articles  of  the  country  are  charged  with 
the  entire  amount.  Although  the  largest  item  in 
the  great  ledger,  you  are  convinced  it  is  correct, 
from  the  fact  that  exports  pay  for  imports,  with  all 
the  charges  incident  to  the  trade. 

Now,  if  the  exports  of  a  country  have  to  pay  all 
the  charges  and  expenses  of  a  legal-tender  medium, 
is  it  not  all-important  to  this  interest  to  have  them 
cheapened  in  every  possible  way  with  a  due  regard 
to  safety  ?  This  is  not  all.  If  exports  lose  five  per 
cent.,  or  five  dollars  on  each  one  hundred  dollars, 
and  the  exports  of  the  country  should  sum  up  five 
hundred   million    dollars,  twenty-five  millions  less 


76  SCIENCE   OF  MONEY. 

of  imports  can  be  commanded,  or,  in  other  words, 
the  producer  of  export  articles  will  be  deprived  of 
consuming  domestic  good's  to  the  amount  of  twenty- 
five  millions,  or  of  the  turning  of  it  into  reproduc- 
tion ;  in  whichever  way  you  view  it,  it  is  a  loss  to 
the  country,  besides  lessening  the  demand  for  home- 
made commodities. 

I  have  met  with  no  work  on  political  economy 
urging  this  fact,  connected  with  the  exports  of  a 
country.  Iustead  of  this,  you  will  find  the  producers 
of  exportable  articles  claiming  all  the  credit  for  en- 
abling their  country  to  resume  specie  payment,  and 
even  that  they  will  force  this  legal  tender  to  be  used, 
and  set  up  for  themselves  until  others  do  the  same. 
All  I  can  say  is,  they  have  not  examined  the  account^ 
and  picked  out  the  important  item  of  twenty  mil- 
lions of  dollars,  or  one-twentieth  of  their  gross  in- 
come. The  country  that  can  stand  this  charge  and 
prosper  must  be  peculiarly  favored,  but  is  blind  to 
its  own  interest  in  not  forcing  all  productions  to  pay 
pro  rata  for  a  legal  tender.  If  the  exports  of  a  country 
support  the  charges  incident  to  a  legal  tender,  the 
producer  should  use  all  honorable  means  to  lessen 
those  charges.  To  do  this  it  is  unnecessary  to  make 
war  on  any  interests,  since  all  productions  are  alike 
interested,  the  exports  directly  and  the  imports 
indirectly. 

In  conclusion,  I  can  only  give  the  advice  of  Joe 
Nash,  the  bar-keeper  on  the  steamer  Natchez,  who, 
when  he  found  a  "  big-fisted  fellow"  stealing  apples 
from  his  barrel  on  the  guard  of  the  boat,  at  once 
pitched  into  him,  but  stated  afterwards  that  he  could 


WHO  PAYS  THE  EXPENSE  AND    CHARGES.       77 

have  whipped  him  much  more  easily  if  both  arms 
had  been  in  the  barrel.  When  you  want  satisfac- 
tion, be  certain  both  arms  are  in  the  barrel. 

If  yon  cannot  import  without  having  something 
to  export,  how  can  the  legal  tender  be  bought  or 
brought  into  the  country  ?  Confine  the  circuit  of 
the  medium  and  legal  tender  to  our  own  country, 
then  all  parties  desiring  it  will  have  to  pay  in  the 
proportion  which  their  products  bear  to  the  volume 
of  the  medium  and  the  supply  of  all  other  com- 
modities. 

In  order  to  make  this  position  clear  to  all,  let 
us  take  the  case  of  a  producer  of  cotton, — a  con- 
stant commodity  of  export.  We  will  suppose  his 
profits  to  be  a  fair  average  of  production  over  con- 
sumption, say  ten  per  cent.,  and  the  production  one 
nundred  thousand  dollars.  In  order  to  realize  from 
this  the  market  rate  in  the  le^al  tender  or  circu- 
lating  medium,  the  exporter  must  be  able  to  nego- 
tiate his  bill  of  exchange  through  a  banker  against 
the  anticipated  proceeds  of  this  cotton  in  the  foreign 
market.  To  do  this  (as  I  have  previously  shown) 
he  must  submit  to  an  average  discount  of  five  per 
cent.,  or  five  thousand  dollars.  Who  are  benefited 
by  this  loss  to  the  producer?  It  is  not  the  spinner  ; 
for  he  has  to  pay  the  same  price,  or  else  the  ex- 
porter would  not  have  been  able  to  pay  the  five 
per  cent,  discount.  The  benefit  is  shared  by  the 
entire  country,  from  the  banker  down  to  the  hum- 
blest recipient  of  the  legal  tender  or  medium  of 
exchange.  It  matters  nothing  to  the  producer  or  to 
the  country  whether  the  proceeds  come  back  in  gold 

1* 


78  SCIENCE   OF  MONEY. 

or  in  calico,  there  is  no  difference  if  the  demand 
require  it, — one  is  a  legal  tender,  the  other  a  liqui- 
dator, either  closes  up  debt  and  liabilities.  Not  one 
dollar  may  have  been  needed  for  a  legal  tender — 
gold.  Still,  as  the  business  of  the  country  was  con- 
ducted on  that  basis,  for  fear  it  might  be  called  for, 
the  charge  was  made. 

If  you  register  your  name  and  take  a  room  at  a 
hotel,  you  have  to  pay  ;  whether  you  eat  and  sleep 
there  or  not,  it  is  the  business  of  the  hotel-keeper 
to  have  meals  and  a  bed  in  readiness  for  you.     So 
the  dealer  and  banker  will  tell  you  he  must  be  ready 
to  pay    the   legal   tender   or   a   simple   transfer  of 
credits ;  however  you  turn  the  export,  the  producer 
has  lost  five  thousand  dollars,  and  all  the  other  pro- 
ducing interests  of  the  country  for  domestic  con- 
sumption have  been  furnished  with  a  legal-tender 
horse  to  ride  all  the  year  free  of  charge.     There  is 
no  remedy,  on  a  gold  basis,  to  save  the  producer  of 
export  commodities  this  heavy  loss ;  he  is  precisely 
in  the   condition  of  the    speculating  bank  issuing 
notes  as  a  medium  convertible  into  coin  on  demand, 
— he  must  at  any  sacrifice  be  ready  to  pay,  whether 
called  on  or  not.  If  the  imports  balance  the  exports, 
no  gold  will  be  required.     Still,  the  five  thousand 
dollars  must  be  paid,  as  a  premium  or  tax  for  the 
privilege    of    acting   as   a   financial    agent    of    the 
country.      ]STo    benefit   can  arise   even   should  the 
producer's  ten  per  cent,  profit  come  back  in  gold; 
if  wise,  he  will  lay  it  out  in  pork  or  flour,  to  extend 
and  aid  reproduction.   The  proceeding,  so  far  as  the 
large  discounts  have  been  submitted  to  in  order  to 


WHO   PAYS   THE  EXPENSE  AND    CHARGES.       79 

procure  a  gold  medium,  is  applicable  to  the  time 
previous  to  the  inauguration  of  the  legal-tender  act 
of  1862,  or  when  gold  was  the  measure  of  value 
and   legal   tender,  and,  in    my  humble  opinion,  is 
conclusive  against  gold ;  but,  in  order  to  make  the 
proof  clear,  and  at  the  same  time  do  justice  to  our 
present  medium  and  to  the  wisdom  of  the  legal-ten- 
der act,  I  have  only  to  refer  to  the  New  Orleans  and 
New  York  quotations  for  rates  of  exchange  drawn 
against  exports.   At  the  former  point  bills  are  made 
against  cotton  exports,  and  at  the  latter  they  are 
consumed  by  imports.  Can  you  point  to  a  single  week 
of  discount  for  sixty-day  bills  exceeding  three  per 
cent.  ?  In  no  eight  years  in  the  history  of  this  country 
can  there  be  found  so  few  fluctuations  from  the  gold 
measure.     This  fact  is  due  alone  to  gold  being  no 
longer  a  legal-tender  medium.     I  have  not  the  data 
at  my  command,  but  will  venture  the  assertion  that 
there  has  not  in  any  siugle  instance  been  a  variation 
exceeding  two  per  cent.,  and  even  that  has  been  but 
for  a  very  short  period  ;  this,  too,  in  the  midst  of  a 
dearth  of  gold,  growing  out  of  the  extreme  wants 
of  the  country  in  the  absence  of  its  leading  export 
article,  cotton.     The  quotations  in  New  York  a  few 
days  ago  (March,  1870)  fell  to  eight  per  cent,  for 
good  bankers'  bills  in  London.     This  was  stated  to 
be  in  consequence  of  heavy  shipments  of  cotton  from 
the  South  to  Europe,  and  a  pressure  of  bills  drawn 
against  this  cotton  in  the  New  York  market,  in  con- 
sequence  of  which  the  rates  fell  from  eight  and  one- 
half  and  eight  and  three-quarters,  being  about  the 
season  average.     Only  a  limited  amount  of  the  ster- 


80  SCIENCE   OF  MONEY. 

ling  bills  sold  in  the  New  Orleans  market  against 
cotton  are  remitted  to  London  and  drawn  against 
direct.  The  great  bulk  is  forwarded  to  New  York 
for  sale,  and  sight  checks  are  drawn  against  proceeds 
from  New  Orleans.  New  York,  beino-  the  larsre 
importing  point,  attracts  all  the  bills  against  exports 
for  consumption  by  importers.  In  the  New  Or- 
leans quotations  for  sight  checks  on  New  York, 
the  fluctuations  rarely  ever  exceed  one  per  cent., 
the  ruling  rates  being  near  par,  or  an  amount 
barely  sufficient  to  cover  the  express  charges  on 
legal  tender,  and  the  usual  bankers'  commission. 
Previous  to  the  war,  when  gold  was  the  medium 
and  legal  tender,  bank-checks  on  New  York  were 
frequently  sold  in  New  Orleans  at  from  six  to  eight 
per  cent,  discount, — at  times  could  not  be  sold  at  all. 
Can  better  evidence  be  offered  in  favor  of  a  con- 
tinuance of  our  present  legal  tender,  and  a  perma- 
nent divorcement  from  gold  as  an  internal  measure 
and  medium  of  exchange?  If  referred  to  at  all,  let 
it  be  as  a  remote  measure,  in  order  that  the  balance 
between  our  imports  and  exports  may  be  adjusted 
in  conformity  with  the  legal  tender  of  the  countries 
with  which  we  are  in  correspondence.  Allow  all 
parties  who  may  so  desire,  or  who  are  required  to 
do  so  by  the  wants  of  their  particular  trade,  to  issue 
gold,  pork,  or  flour  notes,  but  at  the  same  time  allow 
the  people  of  the  interior  to  use  their  own  legal 
tender  in  the  exchange  of  their  productions.  If  in 
possession  of  value,  they  will  at  all  times  be  able  to 
find  it,  without  being  forced  to  pay  a  tax  to  some 
one  to  import  it  from  China.     Let  the  measure  be 


WHO   PAYS   THE  EXPENSE  AND    CHARGES.       81 

at  all  times  alongside  of  their  commodities.  Quick 
sales,  without  unnecessary  reductions  consequent 
upon  the  use  of  a  false  and  variable  medium,  will 
enable  the  producer  to  return  all  the  sooner  to  his 
work  and  commence  reproduction  again. 

During  the  prevalence  of  the  mercantile  system, 
among  many  other  errors  in  production,  consump- 
tion, and  distribution  of  wealth,  laws  and  restrictions 
of  all  kinds  were  enacted  to  prohibit  the  exportation 
of  the  precious  metals.  The  statute-books  of  Eng- 
land, France,  and  nearly  all  other  commercial  na- 
tions are  filled  with  prohibitory  laws;  so  that  one 
not  better  informed  might  imagine  that  gold  and 
silver  constituted  the  meat  and  bread  of  the  people, 
and  that  without  an  abundance  of  these  commodities 
all  would  soon  be  brought  to  starvation.  This  policy 
has  long  since  become  extinct  with  all  commercial 
nations.  Still,  I  regret  to  say,  a  large  majority  of 
the  great  mass  forming  those  nationalities  cling  to 
the  idea  that  all  wealth  consists  of  gold,  and  that  no 
great  prosperity  can  be  expected  by  a  people  that 
has  not  the  bulk  of  its  valuables  invested  in  this 
metal.  Even  enlightened  law-makers  in  our  legis- 
lative halls  are  now  urging  the  government  to  devise 
some  plan  to  prevent  the  gold  products  of  California 
from  being  sent  off.  From  the  enthusiasm  with 
which  this  measure  is  urged,  one  might  be  led  to 
believe  we  were  giving  gold  away,  or  that  we  were 
at  least  receiving  nothing  of  value  in  exchange.  In 
my  opinion  the  producer  has  the  best  right  to  judge 
of  his  own  wants  and  interests ;  and  if  he  is  pros- 
pering  in  the    mining,  the  machinery  and   imple- 


82  SCIENCE   OF  MONEY. 

ments  to  increase  production  will  find  a  place  in 
his  orders.  Production  stimulates  and  provides  for 
consumption.  Good  example  and  moral  teachings 
will  direct  it  in  the  best  channels  for  the  govern- 
ment of  society.  The  prohibitory  law  to  preveut 
the  one  will  extinguish  the  other.  If  you  give  to 
society  the  command  of  luxuries  and  amusements, 
teach  them  that  it  is  a  sin  to  abuse  the  gift.  The 
moment  you  attempt  arbitrarily  to  restrain,  you 
awaken  the  turbulent  and  unruly  passions  of  man's 
nature. 


INSTINCT. 


It  is  wonderful  how  faithfully  Nature  prompts  us 
to  the  truth,  and  how  persistent  she  is  in  urging  us 
on  to  the  correction  of  error;  from  this  I  am  led  to 
believe  that  man's  nature  is  not  wholly  evil,  but 
that,  if  led  astray  for  a  time  by  selfishness  and  temp- 
tations, it  will  finally  right  itself,  although,  it  may 
be,  not  until  the  mischief  is  glaring  and  great. 

I  have  been  led  to  this  train  of  thought  and  reflec- 
tion by  looking  back  no  farther  than  the  seventeenth 
century.  Up  to  its  close  the  edicts  of  the  mercantile 
system,  with  all  its  errors,  shaped  the  legislation  of 
all  Europe,  and  influenced  the  commercial  relations 
of  the  most  astute  minds.  One  of  the  prevailing  fal- 
lacies (to  sustain  which  the  statute-books  are  filled 
with  laws)  was  that  all  wealth  consisted  of  gold;  and 


INSTINCT.  83 

to  retain  it  or  cause  its  import  into  a  country  was 
the  chief  end  of  the  legislation  and  wisdom  of  man. 
In  the  year  1663,  however,  England  gave  this  great 
error  the  death-blow  by  rendering  the  export  and 
import  of  gold  as  free  as  those  of  all  other  goods, 
thus  overthrowing  the  dogma  and  asserting  that 
wealth  consists  in  abundance. 

If  you  will  take  into  account  the  outside  influences 
controlling  all  this  legislation,  you  will  see  the  spark 
of  truth,  the  beacon-light  still  directing  our  course. 
Gold  had  been  by  law  and  convention  made  the  cir- 
culating medium,  legal  tender,  and  measure  of  value 
for  all  property  and  productions;  to  allow  its  ex- 
port was  to  place  all  interests  at  the  mercy  of  its 
return, — or  to  establish  between  the  measure  and 
the  production  an  unnatural  proportion,  subjecting 
all  values,  whether  in  exchange  or  in  the  payment 
of  debt,  to  ruinous  sacrifices.  It  was  this  grain  of 
truth  that  occasioned  the  struggle  for  prohibitory 
laws  to  restrain  the  export,  under  the  belief  that  no 
more  would  be  brought  into  the  country  than  was 
necessary  to  circulate  its  products  and  liquidate 
debt.  To  have  retained  in  the  country  an  adequate 
sum  would  have  mitigated  and  lessened  all  the  evils 
of  a  contrary  course.  The  true  principle  was  not 
seen,— error  had  to  correct  error.  I  am  forced  to 
side  with  instinct,  and  favor  the  legislation  that  will 
retain  in  the  country  a  uniform  sum  of  the  legal- 
tender  medium,  and  not  unnecessarily  permit  its 
exportation  in  the  face  of  a  home  promise  that  it 
should  be  present  on  demand,  or  should  be  at  all 


84  SCIENCE   OF  MONEY. 

times  equal  to  the  commodities  offered  in  exchange, 
or  debts  based  on  the  same  to  be  canceled. 

"We  have  only  to  look  to  our  own  legislation,  no 
farther  back  than  1862,  the  date  of  our  present  legal- 
tender  act,  all  the  credit  of  which  has  been  ascribed 
to  necessity  and  the  perils  then  surrounding  our 
country.  If  the  truth  could  have  been  perceived, — 
what  nature  was  endeavoring  to  work  out  and  de- 
monstrate in  regard  to  a  medium  of  exchange, — the 
prohibitory  law  of  1864  against  gold  would  never 
have  been  enacted.  Now  that  we  have  laid  hold  of 
the  truth,  let  us  adhere  to  it. 

If  gold  is  to  be  the  medium  and  measure  of  value, 
let  us  imitate  the  wisdom  and  magnanimity  of  the 
legislator  from  Maury  county,  Tennessee,  who,  when 
importuned  by  the  member  from  the  adjoining 
county,  Hickman,  to  pass  a  law  prohibiting  the 
people  of  Maury  from  grazing  their  cattle  in  his  county, 
moved  an  appropriation  of  funds  sufficient  to  fence 
in  the  county  of  Hickman.  Nothing  more  was  ever 
heard  of  this  subject  or  of  the  grievances  of  the  people 
of  Hickman.  If  we  are  to  go  back  to  gold,  then  let 
us  fence  it  in,  and  regulate  the  amount  of  stock  to 
the  pasturage. 


GOLD— LEGAL   TEXDEK,  ETC.  85 

GOLD-LEGAL  TEITDES  A1TD  OIROULiTING  MEDIUM. 

There  are  two  agencies  constantly  at  work  whose 
tendency  it  is  to  destroy  the  relation  "between  the 
value  of  gold  and  that  of  all  other  commodities, 
thus  impairing  its  efficiency  as  a  measure  of  value 
or  legal  tender.  One  is  the  natural  increase  from 
mining;  the  other,  the  expansion  of  production. 
The  former  cannot  be  stimulated  to  any  great  ex- 
tent by  the  influence  of  the  demand,  even  should 
it  be  an  extraordinary  one.  New  mines  cannot  be 
found  at  will.  New  fields  can  be  opened  and  cul- 
tivated in  grain  at  the  moment  of  the  effective 
demand  for  consumption.  There  is  an  annual  in- 
dicator, which  prompts  men  to  increase  or  decrease 
production.  Not  so  with  gold,  which  can  be  con- 
sumed only  as  a  medium  of  exchange.  The  arti- 
cles exchanged  cannot  be  dispensed  with,  but  the 
"'medium  can.  The  ablest  statisticians  and  political 
economists  have  differed  widely  as  to  the  supply  of 
gold  now  in  the  world;  even  as  to  the  amount  in 
France  there  is  a  difference  of  twenty-five  per  cent. 
in  estimates.  How,  then,  can  capital  know  when 
to  increase  production,  the  indication  of  supply  being 
so  vague?  Speculation  cannot  prompt  capital  to 
the  increased  production  of  gold.  The  only  sure 
guide  is  the  finding  of  large  nuggets  in  new  fields. 
Then  there  is  a  rust  not  only  of  capital,  but  of 
poverty.  We  read  of  a  bird  that  swallows  its  food 
without  mastication,  and  digests  the  same  without 
nutrition.  The  benefit  is  not  apparent,  as  there  is 
no  increase  in  bulk.     The  effect  of  gold  is  precisely 


86  SCIENCE   OF  MONEY. 

the  same.  With  all  the  wear  or  loss  and  the  orna- 
mental uses  to  which  it  is  put,  the  consumption  is 
thought  to  be  not  over  five  per  cent.  All  other 
commodities,  especially  food,  are  consumed  within 
the  year.  How,  then,  can  gold,  an  unknown 
quantity,  be  a  constant  measure  of  a  decreasing 
commodity? 

If  the  amount  of  gold  in  any  country  could  be 
confined  to  the  wants  of  a  circulating  medium, 
without  increase  or  diminution,  except  so  far  as  the 
exchanges  required  it  for  increased  production,  it 
would  be  a  reliable  legal  tender  and  measure  of 
value.  But  to  allow  it,  as  is  now  the  case,  to  be  all 
attracted  to  one  country  whilst  the  productions  of 
the  country  are  being  harvested  and  exchanged,  is 
to  enhance  its  value  in  the  country  deprived  of  it, — 
which  has  maturing  obligations  incident  to  former 
prosperity.  The  effect  would  not  be  so  disastrous 
if  the  gold  were  only  wanted  as  a  medium  to  effect" 
exchanges;  other  substitutes  and  devices  can  be 
used  to  facilitate  circulation,  but  as  a  liquidation 
the  pound  of  flesh  will  be  insisted  on.  Cannot  the 
labor  of  man,  and  the  industry  and  enterprise  of  a 
great  country  like  this,  be  guaranteed  from  the 
ever-recurring  loss? 

The  vicissitudes  of  life  brine  in  their  train  enough 
of  want  and  misery,  without  compelling  men  to  in- 
sure capital  against  any  portion  of  the  losses  incident 
to  reproduction.  When  men  put  their  merchandise 
on  a  frail  bark  at  sea,  if  unable  to  stand  a  loss,  they 
insure  against  the  perils  incident  to  the  voyage. 
Why  should  not  the  capitalist,  when  he  loans  to 


GOLD— LEGAL    TENDER,   ETC.  87 

labor  the  reproduction  of  one  barrel  of  pork,  be 
forced  to  pay  a  premium  to  some  one  willing  to 
cover  his  risk,  or  stipulate  with  the  borrower  that 
if,  on  his  return  of  the  tender  or  representative 
loaned  him,  it  will  not  command  one  barrel  of  pork, 
lie  will  look  to  him  for  the  difference, — while,  if  it 
commands  more,  he  will  share  the  excess  with  him? 
This  is  what  I  call  "an  eye  for  an  eye,  and  a  tooth 
for  a  tooth." 

I  do  not  wish  to  be  understood  as  being  unwill- 
ing to  give  to  capital  every  guarantee,  both  of  law 
and  equity,  of  a  full  return  of  all  the  value  loaned, 
together  with  such  profit  as  will  fully  cover  all  risk 
and  insure  a  fair  increase :  I  simply  desire  to  pro- 
tect labor  against  the  disastrous  effects  of  the  legal 
tender,  gold,  being  out  of  the  country  at  the  ma- 
turity of  the  obligation;  and  this  can  be  done  in  no 
better  way  than  b}r  substituting  something  that  is 
not  more  likely  to  leave  the  countiy,  than  a  man 
would  be  to  part  with  his  bread  and  meat  to-day 
when  he  is  sure  to  need  them  to-morrow. 

In  my  judgment,  it  wTould  be  far  more  conducive 
to  production  to  have  no  law  which  should  compel 
the  payment  of  any  legal  tender,  than  it  would  be  to 
force  a  man  to  procure  gold  at  the  sacrifice,  it  may 
be,  of  all  his  earthly  possessions.  It  certainly  would 
be  more  just  to  the  laborer  to  allow  him  to  return 
to  the  capitalist  such  values  as  he  borrowed.  The 
gold  lent  was  only  an  order,  or  the  purchasing 
power  of  so  much  food  and  raiment,  on  the  mer- 
chant. And  if  this  is  returned  with  the  ordinary 
profit  or  interest  for  its  use,  it  seems  but  just  and 


88  SCIENCE   OF  MONEY. 

fair,  and  frees  the  laborers  of  the  country  from  sub- 
jection, in  the  language  of  the  stock  exchange,  to  a 
corner  that  may  be  made  in  gold  by  capitalists.     If 
gold  could  be  relied  on  in  its  production  to  indicate 
the  value  of  a  day's  work  as  a  legal  tender  or  medium 
of  exchange,  more  reliance  could  be  placed  on  its 
unchangeableness  as  compared  with  other  commo- 
dities.     This  is  far  from  being  the  case  if  gold  is 
not  where  it  is  needed:  values  not  alongside  of  each 
other  cannot  measure  values  accurately,  since  they 
are  different  in  different  countries.     As  a  medium 
of  exchange,   how  can    it    be   prudent   or  just  to 
measure  value  by  it  or  call  it  a  legal  tender?     So 
far  from  its  being  a  constant  indicator  of  the  value 
of  labor,  it  is  so  generally  worshiped  that  the  most 
insane  projects   are   set  on   foot  to  obtain  it.      A 
short  time  ago,  there  was  a  bill  before  Congress 
asking  the  loan  of  a  large  sum  to  aid  a  great  mining 
company,    stating   that    the    mine    had   heretofore 
yielded  sixteen  millions  of  dollars,  but  that  now, 
with  forty-two  engines  constantly  pumping  water, 
and  other  expenses,  the  annual  cost  of  producing 
this  sum  amounted  to  seventeen  millions  of  dollars. 
I  should  call  this  throwing  one  million  dollars  into 
the  sea,  to  say  nothing  of  the  increased  production 
that   would  result  from  the  employment  of  such  a 
sura  in  any  other  pursuit.     If  seventeen  millions  of 
dollars  wore  expended  to  secure  sixteen  millions  of 
dollars'  worth   of  provisions  to  obtain  subsistence 
for  human  beings,  the  propriety  of  the  outlay  would 
be  sufficiently  evident;  but  to  prosecute  the  milling 
of  gold  at  the  cost  of  so  large  a  sum, —  expended 


GOLD— LEGAL    TENDER,  ETC.  89 

not  in  food  for  the  poor,  but  in  food  for  an  engine, 
— when  so  many  human  beings  are  willing  to  toil 
for  subsistence,  seems  to  me  an  indication  either  of 
lunacy  or  of  the  grossest  selfishness:  it  is  not  the 
increase  of  capital,  but  accumulation  in  the  hands 
of  the  few  at  the  expense  of  the  many.  An  enlight- 
ened philanthropy  would  prompt  the  employment 
of  capital  where  it  would  minister  to  the  largest 
number  of  human  beings  dependent  on  it  for  a 
supply  of  the  comforts  of  existence,  rather  than  use 
it  in  such  wasteful  enterprises  and  in  undertaking 
to  set  up  such  golden  gods.  Such  a  system  of  in- 
vestment would,  in  sixteen  years,  extinguish  the 
entire  capital,  that  might  have  been  used  in  repro- 
duction and  in  the  continuance  of  our  species.  Far 
better  would  it  be  to  forego  the  toil  and  losses  of 
the  mine  and  roam  the  forest  in  search  of  the 
precarious  subsistence  from  its  game. 

It  is  not  from  its  increase  that  gold  derives  its 
interest:  it  is  the  increase  of  commodities  to  be  ex- 
changed by  it  that  regulates  the  charge  of  interest. 
If  with  one  thousand  dollars  I  can  command  the 
subsistence  for  the  reproduction  of  eleven  hundred 
dollars,  I  certainly  can  afford  to  pay  more  for  its  use 
than  if  ten  hundred  and  fifty  dollars  were  the  ex- 
pectancy of  yield.  The  borrower  or  middle  man 
must  have  some  margin  for  a  profit;  if  not,  he  had 
better  fall  back  on  his  own  labor  for  the  means  of 
a  continuance  of  existence.  It  matters  not  what 
direction  be  given  to  capital,  the  employment  must 
yield  more  than  the  interest  promised,  or  it  will 
cease  to  be  used,  and  will  become  valueless.    Hence 

8* 


90  SCIENCE   OF  MONEY. 

the  iutimate  connection  between  capital  and  labor 
— the  decrease  of  the  former  will  impoverish  the 
latter,  and  the  prosperity  of  the  latter  will  give 
security  and  increase  to  the  former. 

If  the  government,  which  has  the  power  to  regu- 
late the  currency  and  money  of  the  country,  would 
look  as  closely  to  the  regulation  of  the  supply  as 
the  wants  of  trade  require,  the  value  and  its  measure 
would  regulate  themselves,  and  the  debtor  class — 
almost  the  only  one  affected  by  legal  tenders — 
would  be  saved  numberless  losses  and  sacrifices  in 
retiring  their  maturing  obligations. 

The  medium  of  exchange,  or  circulating  medium, 
adjusts  itself  to  the  values  presented  in  exchange. 
No  one  is  compelled  to  part  with  his  production 
for  it,  if  he  does  not  consider  it  an  equivalent.  Not 
so,  however,  if  obligations  have  to  be  met :  it  mat- 
ters not  how  great  the  sacrifice,  the  legal  tender 
must  be  procured.  Every  one  is  aware  of  the  fact 
in  the  exchange  of  commodities,  that  if  both  parties 
are  not  in  want  in  the  same  degree,  concessions 
must  be  made  by  one  in  order  to  induce  the  other 
to  change  his  investment. 

Why  the  government,  that  undertakes  to  regulate 
the  medium  and  legal  tender  of  a  country,  and  en- 
acts the  laws  necessary  to  enforce  the  performance 
of  contracts,  however  inconvenient  it  may  be  to  the 
debtor,  should  not,  at  the  same  time,  place  a  legal 
tender  within  the  debtor's  reach,  one  that  he  can 
command  when  he  has  values  to  exchange,  I  am  at 
a  loss  to  perceive.  The  commerce  of  a  country 
would  go  on   the  same,  and  quite  as  many  enter- 


GOLD— LEGAL    TEXDER,  ETC.  91 

prises  of  production  would  be  entered  into,  since  it 
is  not  the  legal  tender  loaned  or  borrowed  on  time 
that  sustains  labor,  but  the  loan  is  really  the  produc- 
tion that  it  will  exchange  for.  It  will  probably  be 
said,  in  answer  to  this,  that  foreign  countries  will 
not  take  our  legal  tenders  for  their  engines,  steam- 
plows,  etc.;  but  if  we  have  commercial  values,  such 
as  cotton,  flour,  pork,  etc.,  we  shall  be  able  to  com- 
mand all  we  need,  or  are  entitled  to,  just  as  cer- 
tainly as  if  we  had  the  gold.  Furthermore,  how 
can  we  obtain  the  gold  if  we  have  no  valuable 
production  to  offer  in  exchange?  When  produce 
is  purchased  with  gold,  the  one  is  as  much  a  pur- 
chasing power  as  the  other  :  the  only  difference 
between  the  two  arises  from  the  law  having  given 
to  the  one  the  power  of  a  legal  tender  in  the 
discharge  of  debts. 

If  this  plan  of  a  local  legal  tender  be  adopted  by 
the  government,  the  time  will  soon  come  when 
other  countries  will  have  something  else  than  gold 
as  a  medium  acceptable  to  us  in  exchange  for  our 
breadstuff's,  cotton,  etc.,  from  the  fact  that  we  will 
give  preference  over  gold  to  commodities  suitable 
for  reproduction.  When  we  give  a  bill  of  exchange 
against  our  values,  it  commands  the  legal  tenders  of 
the  country  upon  which  it  is  drawn.  What  more 
can  we  ask?  Their  legal  tender  will  command  their 
production,  the  relative  value  of  which  was  fixed  and 
entered  in  the  cost  of  the  production  given  for  the 
bill  of  exchange. 

The  adoption  of  two  legal  tenders,  in    a   great 
country  like  ours,  will  not  be  a  difficult  matter, — 


92  SCIENCE   OF  MONEY. 

the  one  for  the  circulation  of  commodities  and  pay- 
ment of  debt  in  regard  to  all  our  internal  transac- 
tions,  the  other  to  meet  foreign  wants.  If  the  mer- 
chant who  deals  with  a  foreign  country,  as  well  as 
with  our  own  people,  should  have  to  procure  a  legal 
tender  acceptable  to  that  country,  it  is  his  business 
to  inquire  into  the  nature  of  the  particular  commo- 
dity promised.  If  the  legal  tender  of  our  country 
will  not  cancel  his  obligation,  he  must  exchange  it 
for  one  that  will.  If  there  is  no  such  value  in  the 
country,  all  that  can  be  said  for  him  is  that  he  has 
not  exercised  the  forethought  which  makes  sure  of 
a  buyer's  ability  to  pay,  before  delivering  goods  to 
him. 

Prudent  merchants  will  not  give  credit  if  pro- 
duction is  not  going  on  and  the  debtor  is  not  likely 
to  have  the  means  of  payment.  To  encourage  debt 
in  a  non-producing  people  is  a  crime,  and  the  sooner 
the  traders  are  brought  to  bankruptcy  the  better  for 
the  country.  The  greatest  losses  incidental  to  trade 
grow  out  of  temporary  speculation  in  one  or  two 
commodities  in  the  expectation  of  a  rise  :  if  the  ex- 
pectation prove  fallacious,  losses  and  bankruptcy 
will  follow.  If  the  reverse  be  the  case,  the  fortunate 
bull  will  be  the  gainer  of  the  bear's  portion.  After 
the  combat  is  over,  there  will  be  the  same  amount 
of  productions  in  the  land  as  before,  and  they  will 
settle  down  to  their  natural  price  when  exchanged 
the  one  for  the  other.  Speculation,  or  the  infla- 
tion of  the  medium  of  exchange,  does  not  diminish 
or  increase  the  relative  value  of  commodities  gen- 
erality :  seldom  are  more    than  one  or  two  excited 


GOLD— LEGAL    TENDER,  ETC.  93 

at  the  same  time.  When  the  epidemic  has  run  its 
course,  the  relative  value  of  pork  and  flour,  or  of 
cotton  and  gold,  will  be  found  the  same.  There 
may  be  many  wrecks  by  the  wayside,  but  the  same 
capital,  the  same  sustaining  power  of  production, 
will  be  in  existence,  and  will  be  applied  to  repro- 
duction, when  the  storm  is  over.  The  inflation  of 
values  may  have  brought  sore  distress  on  many, 
but  one  year's  supply  will  be  left  to  stimulate  in- 
creased prod  uetion. 

In  calmer  times,  when  speculation  has  not  usurped 
the  place  of  production,  the  values  of  all  commo- 
dities are  measured  in  exchange  with  each  other  by 
the  amount  of  labor  required  to  bring  them  into 
existence.  Beyond  this  all  is  speculation,  bringing 
profit  to  the  fortunate  holder,  or  entailing- countless 
loss  on  the  many  who  are  the  dupes  of  men  who 
live  by  their  wits  rather  than  by  their  labor.  Capital 
does  not  often  open  out  these  speculative  channels,  or 
look  to  them  for  a  return  for  its  use;  but  it  is  fre- 
quently drawn  into  the  whirlpool,  and  at  times  its 
owner  is  involved  with  it.  The  earnings  of  the 
poor,  to  a  large  extent,  will  be  absorbed.  I  can 
suggest  no  remedy  for  this  state  of  things  but  a  cash 
business.  Then  the  honest  earnings  of  one  man 
would  not  be  sacrificed  to  pay  the  losses  of  an- 
other. 

There  is,  in  times  of  panic,  a  sort  of  instinctive 
impulse  in  the  mind  of  man  to  heard  up  gold.  This 
disposition  is  increased  precisely  in  the  ratio  of  the 
intensity  of  the  panic.  All  this  happens  at  a  time 
when  debtors  are  least  able  to  bear  the  burden  of  the 


94  SCIENCE   OF  MONEY. 

enhanced  value  of  the  legal  tender  To  withdraw 
gold  from  circulation,  even  temporarily,  is  to  in- 
crease its  exchangeable  value.  Whatever  this  may 
be,  the  entire  burden  is  thrown  on  the  debtor  por- 
tion of  society,  and  seldom  results  in  any  substantial 
gain  to  the  creditor  or  lender  of  capital  generally. 
It  is  the  speculator  that  takes  advantage  of  the  occa- 
sion to  buy  in  the  bargains,  either  to  hold  them  or 
to  profit  by  the  necessities  of  the  laborer.  Produc- 
tion is  retarded  by  the  stagnation  of  articles  of  con- 
sumption, and  this  state  of  things  must  continue 
until  an  equilibrium  is  established  between  the 
legal  tender  and  production.  The  effect  is  to  make 
the  hiborer  poorer  and  the  capitalist  richer  by  the 
periodical  withdrawal  of  the  medium,  or  legal  ten- 
der, from  the  market,  and  the  absorption  that  must 
follow  this  depression  of  commodities  and  the  en- 
hancement of  the  medium  while  liquidation  is  being 
effected. 

All  this  is  continually  passing  in  review,  and  yet 
we  continue,  with  a  blind  idolatry,  the  worship  of 
gold,  when  every  one  knows  that  it  is  absorbing 
productive  capital  in  its  mining,  being  itself  unpro- 
ductive. The  measure  of  its  value  is  the  labor  con- 
sumed in  its  production  :  why  not  direct  this  labor 
to  the  accumulation  of  wealth, — "  the  necessaries, 
conveniences,  and  enjoyments  of  human  life,"  as  so 
aptly  defined  by  Adam  Smith? 

One  circumstance  in  connection  with  gold  should 
always  bo  kept  in  mind.  When  it  is  adopted  by  a 
country  as  a  legal  tender  or  a  circulating  medium, 
it  is   not  sent,  to    that   country,  by  the  banker  or 


GOLD— LEGAL    TENDER,  ETC.  95 

trader  in  it,  until  exportable  values  have  fallen  to  a 
price  sufficiently  low  to  attract  it.  The  first  indi- 
cation of  this  is  the  discount  on  bills  of  exchange 
drawn  on  the  great  points  of  export;  it  is  not 
alone  this  discount  on  the  bills  which  tempts  the 
dealer  in  gold  to  supply  the  demand  for  the  sake  of 
profit,  but  further  concessions  must  be  made,  to 
allow  the  trader  or  exporter  a  reasonable  chance 
for  profit.  The  margin  in  these  times  must  be 
wider  than  in  the  ordinary  course  of  trade,  to  cover 
the  enhanced  risk  incident  to  the  excitability  of 
the  market.  When  cotton  was  selling  at  eight  or 
nine  cents  per  pound,  the  buyer  or  seller  would 
haggle  over  one-eighth  or  one-thirty-second  of  a  cent 
in  price;  now  that  it  is  selling  at  twenty-five  cents, 
we  seldom  see  a  quotation  of  an  eighth,  one  quarter, 
or  one-half:  one  cent  is  looked  upon  as  but  a 
slight  concession.  And  so  it  is  with  all  commo- 
dities: as  prices  become  excited  and  enhanced,  the 
selvedge  must  be  widened. 

The  estimated  loss  to  England  per  annum  in  the 
maintenance  of  a  metallic  circulating  medium 
amounts  to  no  less  than  $20,000,000,  and  that  to 
France  amounts  to  $30, 000,000,  estimating  the  rate 
of  interest  at  five  per  cent,  and  the  wear  and  tear  at 
one  per  cent.  These  are  large  sums  with  which  to 
tax  the  commerce  of  a  countiw,  especially  when 
there  is  added  to  them  the  further  sum  that  could 
be  realized  from  a  prudent  investment  in  reproduc- 
tion. It  is  impossible  to  estimate  what  the  tax 
would  have  been  had  it  not  been  for  the  continuous 
exertions  of  commerce  to  supply  a  cheaper  circula- 


96  SCIENCE   OF  MONEY. 

ting  medium  by  calling  to  its  aid  banks  of  deposit, 
banks  of  circulation,  checks  and  bills  of  exchange 
(the  latter  being  now  used  almost  exclusively  as  the 
purchasing  power  between  countries).  After  all 
these  devices  and  improvements  to  facilitate  the  ex- 
change of  commodities,  we  find  the  two  most  en- 
lightened commercial  nations  laboring  under  this 
heavy  subsidy, — a  sum  which  would  provide  for 
the  comfortable  maintenance  of  their  entire  poor. 
In  the  face  of  this  great  outlay,  who  will  advocate 
a  continuance  of  this  wasteful  idol-worship,  when  a 
substitute  answering  all  the  purposes  and  in  a  more 
expeditious  manner  can  be  found  without  bringing 
in  its  train  this  heavy  loss  to  productions  ?  All  bank- 
ing and  commercial  history  teaches  us  the  nature  of 
the  struggle  that  has  been  going  on  in  all  countries  to 
effect  economy  in  the  circulating  mediums,  and  the 
many  devices  employed,  in  the  then  existing  state 
of  production  and  enterprise,  to  simplify  and  adapt 
them  to  the  necessities  and  wants  of  trade.  Without 
many  of  the  improvements  engrafted  on  the  mediums 
of  the  past,  production  and  consumption  could  never 
have  reached  their  present  elevated  position,  the  ne- 
cessaries now  enjoyed  by  the  poor  would  still  be 
luxuries  far  beyond  their  reach,  the  rude  cabin  would 
still  occup}'  the  place  of  the  stately  mansion,  the 
opulence  of  many  would  never  have  been  dreamed 
of,  nor  could  we  have  had  those  noble  merchant 
princes  whose  charities  fill  all  hearts  with  gratitude 
-and  thankfulness  to  the  Bestower  of  all  good,  who 
enabled  them,  out  of  the  surplus  of  production  over 
man's  consumption,  to  supply  the    deficiencies  of 


LEGAL    TENDER.  '   97 

years  of  want,  and  to  make  cheerful  the  firesides  of 
many  who,  though  equally  deserving,  were  less  for- 
tunate. 


LEGAL  TENDER. 

In  my  investigations  with  an  eye  to  the  cheapen- 
ing of  the  legal  tender  or  circulating  medium  to  the 
country,  it  is  my  duty  to  examine  both  sides  of  the 
question,  in  order  to  arrive  at  just  conclusions,  being 
well  aware  of  the  intricate  and  subtle  nature  of  a 
subject  which  has  occupied  the  attention  of  the  pro- 
foundest  thinkers  of  our  race;  more  especially  as 
a  large  percentage  of  the  savings  from  industry  and 
economy  depends  on  the  direction  of  their  invest- 
ment. 

One  of  the  strongest  objections  that  will  be  urged 
to  a  legal  tender  circulating  medium  convertible 
only  into  a  four  per  cent,  gold-bearing  bond  having 
twenty  years  to  run,  is  that  it  will  not  command 
gold  at  the  face  on  demand.  The  gold-bearing  con- 
sols of  England  have  no  fixed  value  in  the  market, 
but  are  governed  entirely  by  the  ruling  rate  of  in- 
terest and  the  demand  for  capital  to  be  used  in  the 
enterorises  of  commerce. 

If  you  wish  to  change  your  investment,  you 
must  submit  to  the  inexorable  law  governing  all 
other  values.  If  you  sell  at  99,  100,  or  101,  it  is  only 
an  evidence  that  you  have  been  ottered  an  invest- 
ment yielding  more  than  four  per  cent,  per  annum. 

9 


98  SCIENCE   OF  MONET. 

This  is  the  capitalist's  view  of  the  sale  and  conver- 
sion. But  if  you  are  a  bull  or  a  bear,  the  profit  or  loss 
will  be  indicated  when  it  is  known  which  side  of  the 
fence  you  are  on,  the  results  of  which  should  have 
no  more  effect  on  the  value  of  a  United  States  bond 
than  the  moon  has  on  a  Western  cheese-factory. 
After  all,  it  is  but  the  comparison  of  the  income 
and  security  of  what  you  are  going  out  of  with 
those  of  what  you  are  going  into.  If  the  secu- 
rities be  equal,  the  indication  is  only  a  change  in 
the  rates  of  interest.  So  long  as  the  government 
pays  promptly  the  stipulated  rate  of  interest,  and 
shows  ability  to  retire  the  loan  in  full  at  maturity, 
no  more  can  be  asked  :  this  is  all  that  was  promised. 
The  daily  fluctuations  should  give  her  less  concern 
than  the  amount  of  production,  and  the  prosperity 
of  trade,  to  whose  surplus  alone  can  she  look  for 
the  means  of  making  good  her  promise. 

The  next  objection  is,  that  our  legal  tender  is  not 
the  same  as  that  recognized  by  the  countries  in- 
timately connected  with  us  in  the  exchange  of  com- 
modities. We  have  now  no  circulating  medium  in 
common  with  any  other  country.  Nevertheless, 
commerce  feels  not  the  want.  The  country  was 
never  more  prosperous,  never  accumulated  wealth 
with  greater  rapidity  :  all  are  now  merchant  princes, 
and  there  is  no  want  or  destitution  throughout  the 
land  that  a  neighbor  has  not  the  ability  and  the 
disposition  to  mitigate.  What  more  can  be  desired  ? 
Our  annual  productions  command,  the  world  over, 
all  we  want  of  necessaries  and  of  luxuries,  and  have 
filled  our  national  treasury  to  overflowing. 


LEGAL    TENDER  99 

If  England  owes  her  security  to  a  national  debt, 
why  should  not  our  national  debt  become  in  like 
manner  a  security,  and  at  the  same  time  supply  a 
medium  that  is  as  necessary  to  the  exchange  of 
commodities  as  those  commodities  themselves  are 
to  the  prosperity  of  our  people  ?  The  daily  fluctua- 
tions in  the  prices  of  our  bonds  need  give  the  gov- 
ernment no  concern,  if  she  is  fally  prepared  to  make 
good  her  engagements :  the  fluctuations  can  but 
indicate  a  change  in  rates  of  interest  incident  to 
investments  springing  up  at  the  moment.  The  con- 
version of  bonds  into  legal  tender  will  but  indicate 
an  increase  of  productions,  or  a  greater  disposition 
to  trade  and  to  liquidate  past  transactions, — which 
certainly  cannot  be  objected  to,  as  it  is  indicative  of 
financial  prosperity. 

Should  the  bonds  be  returned  to  us  from  Europe 
to  be  converted  into  gold,  the  circulating  medium 
of  the  country  would  be  affected  by  it  no  more  than 
it  would  be  by  their  conversion  into  mess-pork  or 
any  other  surplus  commodity  in  the  land.  With 
provisions  left,  we  can  still  command  labor,  the  pro- 
ducts of  which  will  bring  back  all  the  gold  we  may 
desire.  It  will  not  be  returned  until  we  offer  in- 
ducements in  trade  greater  than  the  demand  that 
prompted  the  conversion  of  the  bonds.  The  indi- 
cation would  be  that  gold  was  more  valuable  in 
Europe  than  with  us,  and  that  the  people  there 
were  short  of  commodities  they  could  not  do  with- 
out, and  were  forced  to  convert  their  securities  into 
something  that  might  command  them  from  others. 
The  reaction  would  come  in  good  time,  and  our  pro- 


100  SCIENCE   OF  MONEY. 

ductions  would  force  the  return,  at  our  price,  of  all 
we  should  want,  even  were  it  gold. 

If  we  would  but  rid  ourselves  of  this  infatuation 
for  gold,  and  dispense  with  it  as  a  circulating  me- 
dium, it  would  not  be  long  before  the  export  of 
provisions  in  a  time  of  scarcity  would  bring  great 
tribulation  in  the  land.  The  interdiction  of  such 
export  on  the  part  of  government,  would  indicate 
much  more  good  sense  and  consideration  for  its 
people  than  were  manifested  by  the  European  gov- 
ernments during  the  past  century  in  their  edicts 
against  the  trade  and  exportation  of  the  precious 
metal.  This  fallacy  in  regard  to  gold  has  happily 
exploded,  and  we  may  hope  that  the  contingency 
will  never  rise  in  which  we  cannot  spare  provisions 
to  the  needy. 


DIVORCEMENT  OF  GOLD  PEOM  CIRCULATING 

MEDIUM. 

If  the  circulating  medium  of  a  country  be  a  de- 
sirable article  for  export  in  the  purchase  of  imports, 
there  will  necessarily  be  sudden  and  ruinous  fluc- 
tuations in  the  interior  exchanges  of  the  country. 
The  greater  the  export  demand  becomes,  the  more 
intense  will  be  the  monetary  pressure  and  the  higher 
the  rate  of  interest  at  all  the  great  commercial  cen- 
ters. Depressing  and  ruinous  fluctuations  in  the 
prices  of  all  export  articles  will  follow,  resulting 
in  losses  not  only  to  the  producer,  but  to  all  specu- 


DIVORCEMENT  OF  GOLD,  ETC.  101 

lators.  Of  all  things  it  is  most  desirable  that  the 
volume  of  the  circulating  medium  to  be  used  in  the 
transfer  of  the  products  of  a  country  should  remain 
as  near  as  possible  the  same,  with  liberty  to  rise 
and  fall  with  increased  production.  The  rate  of 
interest  will  be  the  principal  difficult}7  with  which 
the  trader  will  have  to  contend  in  the  transfer  of  the 
surplus  products  to  market.  The  rate  of  interest 
will  be  low  when'the  exchange  has  been  effected,  or 
in  case  of  short  production,  and  will  rise  with  abun- 
dant production.  When  the  latter  is  the  case  we 
can  the  better  afford  to  pay  usurious  rates  of  in- 
terest. Not  so,  however,  if  the  precious  metals 
form  the  circulating  medium.  Beino-  in  demand  bv 
all  nations  for  their  surplus,  the  exportation  of  them 
will  soon  act  in  an  accelerating  ratio,  producing  in 
a  short  time  contractions  in  all  departments,  result- 
ing in  ruinous  losses  to  the  producer  and  trader,  and 
seldom  realizing  for  the  capitalist  an  average  rate  of 
interest.  All  are  familiar  with  the  periodical  trials 
of  the  commercial  world.  If  possible,  let  them  be 
confined  to  the  trader ;  he  has  but  little  to  contend 
with  that  is  beyond  his  control.  Not  so  with  the 
producer:  his  risks  are  not  insurable, and  cannot  be 
guarded  against  by  any  foresight. 

To  work  this  desirable  change  and  protect  the  cir- 
culating medium  from  the  discouraging  effects  of 
periodical  and  speculative  influences,  and  at  the 
same  time  to  bring  the  surplus  of  the  interior  into 
competition  with  gold  and  silver  for  exportation,  let 
the  government,  which  has  the  power  to  regulate 
the  currency  and  values,  give  the  country  a  circu- 

9* 


102  SCIENCE   OF  MONEY. 

lating  medium  equal  to  the  wants  of  commerce, — 
say  legal  tenders,  not,  as  at  present,  payable  in  gold 
and  silver,  but  based  on  the  promise  that  she  will,  on 
the  funding  of  her  circulating  notes,  give  a  bond 
bearing  a  certain  interest,  due  at  a  fixed  time, — 
twenty  or  thirty  years ;  or  let  her  give  a  perpetual 
annuity  to  the  holder,  and  convert  these  bonds  into 
legal  tenders  when  called  on, — the  promise  made 
in  the  bond  for  principal  and  interest  to  be  that 
of  their  payment  in  gold  and  silver. 

This  system,  with  facility  of  conversion  and  re- 
conversion at  all  the  commercial  centers,  would 
profit  not  only  the  government  but  the  capitalist, — 
the  former,  in  the  relief  from  interest  on  circulating 
notes ;  the  latter,  whenever  he  had  a  surplus  of  circu- 
lating notes, — a  certain  and  easy  rate  of  interest  and 
an  easy  mode  of  investment,  one,  too,  which  he  could 
easily  go  out  of  if  the  increased  productions  of  the 
country  demanded  a  larger  volume  of  circulating 
notes.  Rid  us  of  the  national  bank  system  and  let 
the  entire  circulation  be  legal  tenders,  and  one-half 
of  my  proposition  will  have  been  carried  out. 
Many  advantages  will  grow  out- of  this  divorce- 
ment of  money  of  account  from  an  article  of  mer- 
chandise,— each  will  ebb  and  flow  with  supply  and 
demand.  All  circulating  mediums  are  a  tax  on  a 
country  equal  to  the  average  rate  of  interest.  If 
$700,000,000  be  necessary  to  effect  the  transfer  of 
produce  and  the  financial  exchange  of  the  country, 
the  interest  on  this  sum  will  be  gained  by  the  gov- 
ernment. This  of  itself  will  be  equal  to  a  reduction 
of  one-fourth  of  the  interest  on  our  entire  debt,  and 


DIVORCEMENT   OF  GOLD,  ETC.  103 

will  withdraw  a  like  sum  of  bonds  from  market, 


"j 


effecting  an  improvement  in  all  credits.  There  will 
be  a  double  demand  for  bonds; — on  the  one  hand, 
from  their  drawing  a  certain  interest ;  on  the  other, 
from  increase  in  the  circulation.  In  order  to  have 
nothing  compulsory  in  this  arrangement,  the  con- 
version of  bonds  into  legal  tenders,  and  vice  versa, 
should  be  at  the  market  rate.  This  will  be  influ- 
enced principally  by  the  ruling  rate  of  interest  grow- 
ing out  of  supply  and  demand.  Our  indebtedness 
and  promises  would  then  differ  very  little  from  those 
of  England.  All  that  is  promised  to  the  holder  is 
interest  at  five  per  cent,  per  annum.  The  conver- 
sion and  reconversion  on  the  part  of  the  government 
and  of  her  people  is  a  daily  business.  The  fluctua- 
tions in  the  price  of  gold  or  of  produce  do  not  give 
the  government  much  concern,  except  when  she  has 
to  buy  or  sell  as  an  individual.  The  Bank  of  Eng- 
land looks  to  the  supply  of  gold  to  meet  the  wants 
of  commerce,  and  gives  the  country  the  circulating 
medium  to  effect  the  internal  exchanges.  The  gov- 
ernment has  only  to  provide  what  she  promises  the 
holder  of  her  obligations — gold  for  interest;  and 
when  her  income  is  larger  than  her  payments,  the 
surplus  is  invested  in  her  consols  at  the  market 
rate. 


104  SCIENCE   OF  MONEY. 


PKODUCTION  AND  CONSUMPTION. 

Production  in  excess  of  consumption  will  bring 
into  the  country  a  surplus.  This  can  only  be  in- 
creased by  stimulus  to  the  former  and  economy  in 
the  latter.  The  larger  the  accumulation,  the  greater 
will  be  the  ability  and  the  greater  the  willingness 
on  the  part  of  the  people  to  respond  to  a  tax  equal 
to  an  honorable  maintenance  of  credit.  "Without 
the  ability  or  surplus  to  draw  from,  it  is  idle  to  talk 
of  payment,  either  of  principal  or  interest.  If  there 
be  not  an  annual  balance  of  profit  throughout  the 
land,  apathy  and  indifference  will  soon  be  followed 
by  repudiation,  rather  than  allow  the  springs  that 
give  life  to  enterprise  to  dry  up.  Men  will  fold  their 
arms  and  look  with  stoic  indifference  on  a  tottering 
public  credit  when  their  fortunes  are  gradually  melt- 
ing away  under  the  influence  of  an  overburdening 
tax,  not  only  on  the  homestead  but  on  the  energies 
of  the  people. 

Schemes  and  palliatives  are  but  temporary  expe- 
dients to  gain  time,  and  in  the  end  will  bring  ruin 
on  all  interested.  Far  better  is  it  to  make  an  honest 
showing  and  pay  what  you  can,  in  case  an  extension 
will  bring  no  improvement  of  fortune. 

It  is  not  the  financier  or  the  man  of  expedients 
who  is  needed  at  the  helm:  their  day  passed  away 
with  the  rebellion.  We  now  have  to  come  down  to 
matter-of-fact  actual  payment.  The  man  who  will 
remove  restrictions  upon  commerce,  stimulate  pro- 


PRODUCTION  AND    CONSUMPTION.  105 

duction,  and  inaugurate  a  steady  system  of  liquida- 
tion, is  the  man  we  want  now.  Give  us  less  polit- 
ical jobbing,  and  let  rigid  economy  be  exercised  in 
the  collection  and  disbursement  of  our  immense  re- 
sources. The  happy  influence  will  soon  reach  the 
producer,  and  ere  long  he,  too,  will  find  his  annual 
surplus  increasing;  from  which  he  will  the  more 
cheerfully  meet  the  demands  of  the  tax-gatherer. 

It  is  worse  than  useless  to  consume  our  time  in 
seeking  palliatives  and  in  tinkering  to  keep  up  the 
public  credit.  Strike  deep  at  the  root;  show  ability 
to  pay;  let  the  annual  surplus  in  the  country  be 
large  and  increasing,  and  ere  long  the  balance  of 
trade — the  great  commercial  barometer — will  bring 
the  wished-for  credit.  We  ma}7  legislate  and  re- 
legislate,  may  resort  to  one  expedient  after  another, 
but  in  the  end  all  will  prove  worthless  if  we  are 
destitute  of  thrift  and  economy ;  give  to  the  country 
this  leverage  power  and  the  security  of  a  continu- 
ance, and  in  a  few  years  the  obligations  of  the  gov- 
ernment will  be  at  par  with  gold.  The  promise  of 
the  government,  bearing  three  or  four  per  cent,  in- 
terest, will  bring  into  the  country  any  commodity 
we  want,  and,  with  a  universal  surplus,  a  sufficiency 
of  the  great  bugbear,  gold. 

When  I  undertook  this  investigation,  it  was  in 
the  hope  that  in  time  I  might  be  able  to  demon- 
strate a  great  truth  underlying  production,  consump- 
tion, and  the  laws  governing  exchange  by  and 
through  a  medium.  No  part  of  the  investigation 
will  be  found  to  favor  the  accpuisition  of  wealth  ex- 
cept through  industry  and  economy.     I  have  not 


106  SCIENCE   OF  MONEY. 

been  at  war  with  any  party,  sect,  or  system,  nor 
have  I  been  working  for  any  other  end  than  the 
development  of  truth.  If  the  establishment  of  the 
principle  should  overthrow  other  views  or  s}Tstems, 
all  I  can  say  is,  let  truth  prevail,  and  let  error  be  dis- 
carded as  far  as  lies  in  the  power  of  weak,  erring 
mortals. 

I  believed  there  was  an  elementary  principle 
which,  if  by  analysis  it  could  be  made  manifest  in 
the  exchange  of  products,  would  insure  to  labor  the 
just  reward  of  honest  toil  and  place  in  each  field  of 
enterprise  an  unalterable  and  just  medium  to  be 
used  in  the  exchange  of  its  products.  Finding  all 
mediums  to  be  conventional,  I  could  see  no  justice 
in  delegating  to  any  production  or  article  of  mer- 
chandise the  arbitrary  power  of  fixing  the  value  of 
all  others,  and  especially  to  the  one  so  pre-eminently 
migratory  in  its  habits  and  artful  in  its  concealments, 
that  at  the  words  "presto,  change,"  it  vanishes' 
from  human  sight.  It  is  the  little  "joker"  and 
three  thimbles ;  when  you  see  it  placed  under  one, 
and  bet  on  it,  you  find  it  is  not  there. 

As  produce  measures  and  buys  produce,  all  com- 
modities should  have  a  fair  chance,  and  no  monopoly 
should  be  given  to  one  product  over  another.  If  I 
desire  your  surplus  more  than  you  do  mine,  give 
me  an  inducement  in  quantity ;  but  do  not  tell  me 
that  yours  is  worth  more  than  mine  because  yours 
can  be  used  as  a  legal  tender.  If  you  did  not  give 
it  additional  value,  how  can  you  honestly  lay  claim 
to  the  difference  ?  If  government  and  law  have  given 
you  this  power  over  me,  is  it  not  unneighborly  to  use 


PRODUCTION  AND    CONSUMPTION.  JOT 

it  to  the  ruin  of  myself  and  family,  when  I  exercise 
industry  and  economy?  And  these  I  must  have 
exercised,  or  else  I  should  not  have  the  necessaries 
and  conveniences  of  life  and  a  house  for  shelter. 
But,  because  I  have  had  the  misfortune  to  promise 
it  you  as  a  legal  tender,  you  will  force  me  to  obtain 
it,  at  whatever  sacrifice  to  myself. 

The  conclusion  is  that  productions  should  have  a 
fair  field  and  be  the  measure  of  each  other.  When 
I  give  an  order  or  bill  of  exchange  for  a  value,  how- 
ever large  the  amount  may  be,  the  paper  on  which 
it  is  written  has  no  value  in  itself,  but  it  caused  the 
delivery  of  the  goods.  A  circulating  medium  can 
do  no  more ;  but  it  can  do  all  this,  even  though  it 
be  as  worthless  as  the  paper  on  which  the  bill  of  ex- 
change was  written. 

To  clothe  a  medium  of  paper  with  this  power,  the 
issue  must  be  controlled  by  the  necessity  that  called 
it  into  being.     No  party  can  be  so  competent  to 
judge  of  the  supply  as  those  who  have  the  sole  in- 
terest, and  that  is  the  people  of  this  country.     If 
they  go  to  the  government  and  say,  "  We  have  your 
bonds  bearing  four  per  cent,  per  annum  interest  in 
gold,"  and  offer  to  rid  it  of  the  tax,  preferring,  as 
they  may  do,  mess-pork  to  gold,  and  ask  for  legal- 
tender  notes,  it  is  the  dutv  and  the  interest  of  the 
government  to  issue  them.     It  is  the  people  desiring 
to  use  their  own  notes  in  the  transfer  and  circula- 
tion of  their  property.    The  fact  that  they  have  been 
able  to  give  a  valuable  consideration  (a  gold  bond) 
is  conclusive,  and  should  be  evidence  to  all  inter- 
ested parties  that  they  are  able  to  make  good  this 


108  SCIENCE   OF  MONEY. 

promise  at  their  convenience;  and  if  misfortune 
should  ever  overtake  them  collectively,  their  losses 
will  be  confined  to  themselves  and  not  visited  on 
parties  having  no  direct,  interest  in  the  matter. 
The  losses,  if  any,  will  be  distributed  as  equitably 
as  any  system  of  bankruptcy  could  devise.  We 
will  still  have  our  couutry  and  the  assets  that  may 
be  left. 

Now,  you  will  naturally  inquire,  What  will  be  the 
effect  if  all  Europe  should  throw  its  bonds  on  the 
market  and  take  up  the  circulating  legal-tender  notes 
and  hold  them  from  circulation  ?  For  a  moment  it 
will  depress  the  prices  of  all  commodities,  inducing 
the  purchasers  of  bonds  and  the  banking  institu- 
tions at  once  to  turn  them  and  their  reserve  into 
a  medium  in  order  to  bu}r  up  the  values  in  the 
country:  in  this  state  of  the  market,  if  the  Euro- 
pean holders  of  the  notes  should  wish  to  realize 
and  throw  on  the  market  the  additional  quantity  of 
circulating  medium,  the  country  will  have  gained, 
from  the  enhanced  prices  of  their  products  and 
property,  all  that  it  had  previously  lost, — enabling 
many  citizens  to  reinvest  in  bonds  (or  fund  the 
notes).  One  great  security  against  such  violent 
changes  will  be  that  our  banking  institutions  will 
have  made  discounts  and  loans  from  the  accumu- 
lation of  deposits,  and  will  be  compelled  to  furnish 
legal  tenders  to  their  customers  and  depositors. 
This  will  cause  them  to  keep  at  all  times  their  re- 
serve in  bonds,  in  order  that  they  can  at  any  moment 
meet  the  demand  for  circulating  notes.  At  this 
point  (in  order  to  meet  the  next  inquiry),  it  may  be 


PRODUCTION  AND    CONSUMPTION.  100 

stated  that  a  system  of  banking  on  values  without 
circulating  notes  will  be  inaugurated,  realizing  for 
them  and  all  parties  interested  larger  and  surer 
profits  than  have  ever  been  realized  by  any  or  all 
the  banking  schemes  ever  inaugurated  in  this  coun- 
try— not  excepting  the  present  national  banks,  with 
all  the  monopoly  and  prestige  of  government  in- 
dorsements and  double  interest. 

It  is  only  necessary  to  refer  to  the  banking  estab- 
lishments in  London,  and  the  enormous  profits 
realized,  to  see  at  a  glance  the  effect  of  banking 
when  freed  from  the  uncertain  contingencies  of  the 
issue  of  circulating  notes  that  so  often  drive  them 
and  the  country  to  bankruptcy.  These  banks  trans- 
act all  their  business  by  the  use  of  Bank  of  England 
notes,  checks,  bills  of  exchange,  etc.  The  baiiks 
referred  to  are  the  following  : 

Capital.  Deposits. 

London  and  Westminster $5,000,000  $75,000,000 

Union 3,500,000  80,000,000 

London  Joint  Stock 3,000,000  70,000,000 

Aggregate $11,500,000  $225,000,000 

Their  average  annual  dividends  are  thirty  per  cent, 
per  annum,  or  fifteen  per  cent,  every  six  months. 
Now,  compare  this  with  the  Bank  of  England, — 
the  great  regulator  of  the  measure  of  exchange, 
provider  of  the  legal  tender,  and  fiscal  agent  of  the 
government,  whose  notes  are  received  and  disbursed 
for  all  public  dues, — which,  with  a  capital  of  some 
$70,000,000,  has  a  deposit,  both  public  and  private, 
of  only  an   average  of  about  $100,000,000,  and  a 

10 


HO  SCIENCE  OF  MONEY. 

circulation  of.  about  $100,000,000,  from  all  which 
she  earns  and  declares  dividends  of  not  more  than 
six  and  a  half  per  cent,  per  annum.  "What  makes 
this  great  difference  in  the  sum  of  profits?  The 
Bank  of  England  has  the  bag  to  hold  for  all  parties, 
and  her  circulating  notes  subject  her  to  all  the 
vibrations  and  vagaries  of  gold  seeking  more  profit- 
able and  distant  markets,  forcing  her,  whenever 
in  peril  and  trouble,  to  call  on  the  government 
for  aid  and  protection  from  pressure  within  and 
without. 

Now,  I  would  have  all  parties  to  hold  their  own 
bags  and  take  their  grists  to  none  but  Uncle  Sam's 
mill,  where  they  can  toll  it,  and,  if  they  make  a  mis- 
take, will  have  no  one  to  blame  but  themselves,  and 
will  have  the  satisfaction  of  knowing,  when  return- 
ing home,  that  the  overplus  is  in  the  great  govern- 
ment bin,  laid  up  for  the  day  of  need. 

If  the  produce  of  a  country  will  not  buy  commo- 
dities, then  it  should  not  receive  or  give  credit. 

If  a  country  needs  a  legal  tender  more  than 
goods,  it  is  doing  the  producers  a  service  not  to 
place  "their  wants  with  the  wants  of  those  seeking 
a  legal  tender. 

If  you  want  a  legal  tender  to  the  full  value  of  your 
produce,  you  do  not  want  calico.  You  must  do 
without  one  or  the  other;  and  if  you  have  nothing 
to  exchange  you  must  do  without  both,  and  go  to 
work  to  get  something  to  gratify  your  wants,  if  you 
have  any.  Honest  labor  will  always  find  capital 
willing  to  furnish  the  necessaries  to  sustain  it  while 
at  work. 


PRODUCTION  AND    CONSUMPTION.  \\\ 

A  circulating  medium  being  necessary  in  the 
disposal  of  commodities,  and  a  convenience  worth 
some  price,  which  can  be  measured  only  by  the 
value  in  use,  the  power  that  issues  it  should  be  paid 
a  reasonable  consideration.  If  the  rate  of  interest 
the  issuing  power  is  willing  to  pay  be  four  per  cent, 
per  annum  for  the  use  of  a  legal  tender  or  money  of 
account,  it  is  but  reasonable  that  the  government 
(being  the  people)  should  be  paid  this  sum  for  the 
use.  Now,  if  you  desire  this  medium  to  such  a  de- 
gree that  you  are  willing  to  pay  more  than  four  per 
cent.,  and  will  surrender  to  the  government  her  obli- 
gation calling  for  this  rate,  four  per  cent.,  in  exchange 
for  the  legal  tender,  then  you  will  have  paid  the 
price  or  worth  of  the  medium  or  convenience. 

It  is  the  duty  of  the  government  to  establish 
light-houses  and  to  undergo  many  other  charges 
for  the  protection  of  the  lives  and  property  of  her 
citizens ;  it  is  not  less  her  duty  to  furnish,  in  financial 
matters,  the  headlight  and  guide  to  all  her  citizens 
who  are  willing  and  able  to  pay  for  it,  and  not  ex- 
pose them  to  the  liability  of  being  deceived  by  the 
false  lights  of  others  in  so  delicate  a  matter  as  the 
disposal  of  the  products  of  their  labor. 

As  the  design  is  to  protect  all  rights  without 
undue  bias  in  favor  of  any,  in  giving  to  the  people 
this  legal  tender  and  measure  of  value,  there  should 
be  a  universal  standard  by  which  it  could  be  meas- 
ured, and  this  currency  or  medium  should  be  ob- 
tainable only  in  one  way, — in  exchange  for  four 
per  cent,  bonds  having  thirty  years  to  run  to  ma- 
turity.    I  would  have  the  rule  so  rigid  that  gold, 


112  SCIENCE   OF  MONEY. 

the  ultimate  measure,  could  not  command  these 
circulating  notes  and  measure  of  value.  A  party 
having  gold  or  mess-pork,  and  desiring  to  convert 
them  into  legal  tender,  should  be  compelled  to  con- 
vert them  into  four  per  cent,  bonds,  and  these  alone 
should  be  able  to  command  them.  A  firm  adher- 
ence to  this  would  give  all  parties  an  equitable 
chance  in  a  free  market  to  supply  their  wants  at 
market  prices.  With  four  per  cent,  bonds  for  cir- 
culating medium  and  legal  tender,  all  commodities 
and  evidences  of  debt  would  compete  for  bonds  or 
legal  tender,  —  the  demand  adjusting  the  supply, 
and  the  supply  fixing  the  demand.  Bonds  would 
then  be  rated  by  the  value  of  legal  tender,  and  the 
circulating  medium  would  be  regulated  by  the 
amount  of  productions  it  would  command.  All 
commodities  would  then  measure  each  other, — and 
the  medium  used  in  exchanging  them,  having  no 
intrinsic  value  while  so  used,  would  be  estimated 
by  its  use  and  convenience  in  facilitating  the  sale 
and  purchase  of  production  and  the  liquidation  of 
debt. 

The  capitalist,  or  lender  of  the  legal  tender  or 
medium,  only  gives  the  command  in  the  market  of 
legal-tender  value,  or  so  much  of  production;  and 
if  he  receives  back  at  the  stipulated  time  a  similar 
order  for  commodities,  and  his  four,  six,  or  ten  per 
cent,  for  the  use,  there  can  be  no  injustice;  for  I 
hold  that  a  legal  tender  of  to-day  that  is  fixed  to 
remain  and  be  the  same  forever,  is  no  more  likely 
to  depreciate  than  the  productions  it  was  originally 
exchanged  for.     An  order  for  gold  itself  is  no  more 


PRODUCTION  AND    CONSUMPTION.  \\2> 

likely  to  purchase  a  greater  quantity  of  mess-pork 
than  the  mess-pork  is  to  buy  a  greater  quantity  of 
gold.  The  value  of  one  is  found  by  what  it  will 
exchange  for ;  the  other  may  have  an  indispensable 
value  in  sustaining  human  labor  during  the  produc- 
tion of  articles  in  greater  demand. 

It  is  the  fear  of  depreciation  in  the  legal  tender 
that  deters  governments  from  a  change  from  gold  as 
a  standard.  It  is  in  their  power  to  render  the  one  as 
unchangeable  as  the  other,  if  they  will  but  be  honest 
and  limit  the  procurement  of  the  medium  in  ex- 
change only  for  a  fixed  value,  and  let  it  be  the 
limiting  power  of  the  value  of  the  medium.  If 
there  should  for  a  time  be  more  on  the  market 
than  the  wants  of  trade  demand,  the  excess  will 
soon  find  its  way  back  to  bonds  ;  and  if  there  should 
be  more  bonds  on  the  market  than  there  is  capital 
to  bear,  then  it  is  the  misfortune  of  the  holders. 
In  this  state  of  the  market  it  would  be  the  duty 
of  the  government  to  provide  for  the  redemption 
of  the  portion  in  excess  of  the  demand,  at  the 
fixed  rate  of  interest.  This,  however,  can  never 
take  place  so  long  as  there  are  articles  of  value  to 
exchange.  In  this  case  holders  of  bonds  can  readily 
part  with  them  and  go  into  investments  paying 
higher  rates  of  interest.  It  is  impossible  for  any 
securities  or  commodities  to  escape  the  great  law 
of  trade,  of  being  measured  by  each  other,  and 
not  by  any  one  standard.  The  standard  or  legal 
tender  is  only  the  limiting  power  of  debt;  and  to 
find  out  the  value  of  the  debt,  you  must  compare 
the  legal  tender  with  the  necessaries,  conveniences, 

10* 


114  SCIENCE   OF  MONEY. 

and  amusements  it  will  command.  The  circulating 
medium  of  a  country  must  be  viewed  in  the  light 
of  a  great  highway  to  market,  that  can  be  used 
and  traveled  over  by  thousands  who  own  none  of 
the  stock,  but  who  must  finally  pay  such  toll  as  will 
eventually  give  a  dividend  to  the  owners,  or  else 
the  road  will  not  be  renewed  and  kept  in  good 
order.  This  being  the  case,  it  is  no  part  of  the 
business  of  the  government  to  undertake  at  the  end 
of  the  line  to  deliver  any  other  commodities  to  the 
consignee  than  the  particular  goods  shipped.  If 
parties  demand  gold  instead  of  mess-pork,  or  flour 
in  place  of  gold,  it  will  be  her  duty  to  turn  to  the 
bill  of  lading  and  discharge  the  cargo  in  the  order 
and  condition  in  which  it  was  received. 


CREDIT  THKOUGH  CIRCULATING  NOTES. 

I  doubt  much  whether  credit,  through  a  circu- 
lating medium  or  bank-notes  not  legal  tender, 
ever  conferred  any  real  substantial  benefit  on  the 
productions  of  any  country,  from  the  fact  that  it 
does  not  create  or  call  into  being  any  of  the  neces- 
saries or  conveniences  of  labor.  Gold  can  be  sent 
off  to  distant  countries  and  there  command  the 
tools  and  implements  of  reproduction ;  but  bank- 
notes, even  if  convertible  into  gold,  and  of  high 
credit,  will  not  circulate  as  money  in  other  countries. 
Now,  we  all   know  that  the  moment  conversion  is 


CREDIT  THROUGH  CIRCULATING    NOTES.      H5 

demanded  in  order  to  get  a  commodity  for  export, 
the  loan  will  be  denied.  Banks  of  circulation  de- 
siring credit  do  not  lend  gold;  but  for  a  percentage 
they  will  undertake  to  lend  credit,  or  indorse  you 
up  to  the  country,  Ivy  involving  your  friends,  in  the 
shape  of  notes  payable  on  demand,  to  be  exchanged 
for  your  neighbor's  produce  and  supplies.  If  you 
are  industrious  and  economical,  in  nine  cases  out 
of  ten  you  can  procure  the  supplies  from  your 
neighbor  direct,  and  need  not  complicate  the  entire 
industry  of  the  country  by  giving  to  a  numerous 
horde  of  wild  speculators  a  fiction  with  which  they 
can  buy  up  the  commodities  needed  so  much  by  the 
labor  of  the  country.  The  instances  of  prudence, 
or  of  the  use  of  economy,  in  the  issuing  of  these 
credits,  have  been  so  rare,  that  I  am  firmly  convinced 
a  greater  degree  of  prosperity  would  have  been  de- 
veloped throughout  the  country,  by  confining  all 
credit  direct  to  values,  and  their  use  to  the  prudent 
and  industrious:  the  revulsions  then  would  not 
only  have  been  few,  but  would  have  been  confined 
to  the  adventurer.  There  is  already  too  much 
credit  given  in  the  sale  of  the  products  of  labor. 
If  the  holders  of  values  would  demand  values  in 
exchange,  losses  would  not  be  a  wipe-out,  but  would 
be  only  for  the  percentage  of  depreciation.  Con- 
fine all  time  sales  and  purchases  to  bulls  and  bears, 
and  let  them  settle  their  own  differences,  if  able.  The 
country  will  then  have  something  better  than  prom- 
ises in  return  for  the  products  of  human  labor.  If 
there  remain  a  surplus  in  the  country,  industry  will 
be  able  to  command  it  in  exchange  for  an  honest 


116  SCIENCE   OF  MONEY. 

day's  work.  Should  there  still  be  left  commodities 
over  consumption,  they  will  command  the  surplus 
of  others  without  this  continual  speculation  on 
credit,  and  its  abuse.  Traders  will  spring  up,  with 
the  requisite  facilities  to  seek  new  and  increasing 
markets.  "Without  this  annual  surplus,  the  food  of 
commerce,  those  engaged  in  the  exchange  cannot 
prosper  or  become  opulent. 

If  properly  considered,  there  can  be  no  loan  of 
capital  in  the  exchange  of  products,  they  being  them- 
selves the  capital.  Confine  the  speculator  to  values 
in  exchange  for  values,  and  you  will  have  less  use 
for  a  bankrupt  court.  Give  to  labor  a  fair  advance 
on  the  prospective  products,  and  they  in  their  turn 
will  command  the  necessaries,  conveniences,  and 
amusements  of  life.  The  supply  is  much  more 
likely  to  continue  equal  to  the  demand  than  if 
allowed  to  be  dissipated  by  the  reckless  speculator 
devoid  of  capital  other  than  his  wits. 

I  am  not  at  war  with  credit,  nor  do  I  wish  to 
lessen  its  beneficial  influences ;  but  as  it  can  be,  and 
continues  to  be,  abused,  my  desire  is  to  lessen  or 
mitigate  its  evils.  I  am  well  aware  that  my  limited 
ability  has  caused  many  of  my  statements  and  ar- 
guments to  be  somewhat  difficult  of  comprehension; 
but,  at  the  same  time,  I  do  not  underrate  my  efforts  so 
far  as  not  to  feel  sure  of  the  enlightenment  of  a  ma- 
jority of  those  who  will  take  the  trouble  to  think  of 
what  I  have  undertaken  to  demonstrate. 

But  few  are  fond  of  investigations  so  intricate  as 
the  foregoing,  and  lean  only  urge  on  this  class  the  ob- 
ligation due  to  themselves  and  their  co.untry  to  make 


MEDIUM  SHOULD   BE  LEGAL    TENDER.        117 

themselves  better  informed  in  regard  to  many  of  the 
mysteries  and  truths  involved  in  the  ever-widening 
and  extended  commerce  growing  out  of  the  industry 
and  economy  of  a  go-ahead  people  such  as  we  are, 
whose  annual  production  and  consumption  have 
never  been  equaled  by  the  most  favored  nation. 

To  the  aged  and  the  man  of  leisure,  I  trust  I  have 
rendered  needless  the  intense  thought  which  it  is 
absolutely  necessary  to  bring  to  bear  in  all  such 
investigations,  and  have  enabled  them  to  pursue 
the  subject  to  a  more  enlightened  conclusion. 

Many  passages  will  be  found  to  be  a  seeming 
repetition ;  but  the  subject  is  so  subtle  that  I  was 
compelled  to  approach  the  underlying  principles 
from  different  stand-points,  in  order  to  shed  more 
light  on  the  main  question.  Hence  the  many  ex- 
pressions and  verifications  of  the  same  truths;  and 
I  trust  the  unfamiliar  reader  will  pardon  the  seem- 
ing tautology,  especially  if  it  has  given  him  a  clear 
understandiug  of  the  unchangeable  truths  of  polit- 
ical economy. 


MEDIUM  SHOULD  BE  LEGAL  TENDER. 

If  labor  be  the  first  cost  of  all  value,  then  an 
abundance  or  large  production  will  cheapen  prices 
when  compared  with  all  other  commodities  not  so 
found ;  in  other  words,  more  of  the  increased  pro- 
duction, in  the  absence  of  an  increased  demand, 
must  be  given  for  values  that  have  not  changed  in 


118  SCIENCE   OF  MONEY. 

quantity  or  for  which  the  demand  has  not  increased. 
Now,  should  the  position  of  the  markets  to-day  be 
three  barrels  of  flour  for  one  of  mess-pork,  the  same 
proportions  will  exist  in  the  future,  provided  the 
supply  and  demand  continue  unchanged;  this  rule 
will  be  found  ^equally  applicable  to  all  productions 
of  present  necessity,  but  cannot  be  applied  so  in- 
variably to  articles  of  luxury;  they  must  continue 
to  fluctuate  with  the  ability  or  surplus  of  those  who 
have  heretofore  indulged  in  them.  Disastrous  ven- 
tures in  trade,  from  whatever  cause,  will  cut  short 
the  power  to  indulge,  especially  of  that  class  which 
was  accustomed  to  take  the  largest  amount  of  luxu- 
ries:  the  labor  producing  these  luxuries  may,  from 
want  of  demand,  be  thrown  on  that  class  producing 
the  necessaries  of  life,  or  that  portion  of  labor  which 
sustains  the  labor  of  all  other  occupations.  The 
effect  will  be  an  increase  of  products  of  prime  neces- 
sity, a  cheapening  of  the  money  price  of  labor,  and 
an  abridgment  of  the  consumption  of  luxuries  by 
the  parties  consuming  most  largely,  cheapening 
them  for  a  time,  and  then  extension  to  those  who 
previously  shared  but  sparingly,  but  in  the  end 
(from  the  enhanced  price  consequent  upon  the  with- 
drawal of  labor)  a  total  depreciation.  Undue  spec- 
ulations and  unguarded  ventures  bring  trouble  and 
disaster  on  all  parties.  Production  may  be  ill  assisted 
and  cause  great  embarrassment  and  want  for  a  time, 
but  no  degree  of  general  prosperity  can  bringan  over- 
supply  or  glut.  An  increase  in  productions  gives 
greater  ability  to  buy;  and  the  buyer's  ability  to  con- 
sume enables  the  party  making  the  exchange  with 


MEDIUM  SHOULD   BE  LEGAL    TENDER.        H9 

him  to  dispose  of  his  wares  and  increase  his  con- 
sumption, satisfying  the  great  law  of  production, 
the  stimulus  of  which  is  the  desire  to  consume.  So 
long  as  there  is  a  general  surplus  there  will  be  no 
impediment  to  the  consumption.  In  this  connection 
arises  the  great  necessity  of  discouraging  all  wild 
speculations  by  forbidding  the  use  of  any  device 
that  will  either  decoy  or  deceive  labor,  the  result  of 
which  is  to  estrange  capital  from  labor,  and  cause  the 
one  to  be  shy  of  the  other.  It  is  the  products  of  last 
year  that  put  labor  in  motion  ;  but  without  the  co- 
operation of  capital — the  tools  and  labor-saving  ma- 
chines of  the  present  day — the  needful  conveniences 
of  an  economical  existence  could  with  difficulty  be 
procured.  No  human  labor  could  compete  with  the 
mowing  machinery  in  haymaking,  or  with  the 
reaper  in  furnishing  cheap  grain ;  while  the  rail- 
splitter,  with  his  old-fashioned  axe,  would  be  far  be- 
hind the  one  using  the  improved  Collins.  All  this 
goes  to  prove  that  there  is  a  continuous  copartner- 
ship between  capital  and  labor;  each  is  working 
for  a  share  of  the  crop.  In  agriculture,  frequently, 
both  share  alike ;  but  where  the  preponderance  of 
capital  in  machinery,  etc.  is  great,  labor  must  be  con- 
tented with  a  smaller  percentage.  There  must  be 
harmony,  liberality,  and  fair  dealing;  the  one  must 
not  stipulate  for  the  lion's  share,  nor  must  the  other 
be  wanting  in  an  honest  effort  to  fulfill  the  contract. 
No  extended  commerce  or  trade  can  spring  into 
existence  without  these  requisites, — each  interest 
should  be  shielded  from  the  disasters  of  the  reckless 
speculator  and  gambler  in  values. 


120  SCIENCE   OF  MONET. 

Capital  is  the  great  benefactor  of  labor,  saving  up 
by  economy  its  surplus,  and  sharing  its  fruits  with 
industry  and  reproduction.  It  makes  no  difference 
in  the  relationship  of  capital  to  labor,  whether 
the  owner  of  it  puts  labor  in  motion,  or  whether 
the  retired  capitalist  lends  it  to  an  intermediate 
agent.  Still,  labor,  if  honestly  dealt  with,  must  have 
the  accustomed  reward  for  its  toil,  leaving  the  re- 
mainder of  the  products  to  be  apportioned  between 
capital  and  the  agent.  The  intermediate  man  is  the 
speculator  on  credit, working  for  the  difference:  he 
may  be  overreached  and  bring  disaster.  Capital 
may  survive  the  loss  with  but  little  inconvenience, 
as  its  eggs  are  not  generally  all  put  in  one  bas- 
ket; but  let  there  be  no  device  in  all  these  'ex- 
changes and  complications  to  deprive  labor  of  it3 
full  share,  for  the  Good  Book  says,  "  the  laborer  is 
worthy  of  his  hire."  The  customary  devices  us^d 
by  this  intermediate  agent  to  force  success  against 
an  advanced  demand,  are  circulating  notes,  or  orders 
for  capital  carrying  the  promise  of  legal  tender: 
when  these  are  dishonored,  the  loss  falls  entirely  on 
capital  and  labor.  The  latter  may  not  survive  the 
loss,  no  portion  of  which  can  fall  on  the  speculator. 
He  may  be  inconvenienced  and  embarrassed  by 
being  thrown  out  of  the  ring,  but  the  only  capital 
he  put  into  the  business  was  capacity;  while  in,  he 
received  his  grub,  and  he  retires  without  profit. 

Still,  this  intermediate  agent  is  not  only  useful  but 
absolutely  necessary  in  the  extension  of  the  inter- 
course between  capital  and  labor,  and,  if  he  had 
not  been  enabled  to  borrow,  in  addition  to  capital, 


MEDIUM  SHOULD   BE  LEGAL    TENDER.         121 

these  false  orders,  or  bank-notes,  so  called,  he  might 
have  been  induced,  in  due  time,  to  discontinue 
the  venture  and  save  all  parties  from  loss.  Both 
capital  and  labor  would  have  had  no  other  inconve- 
nience or  loss  than  the  looking  up  of  a  more  profitable 
employment.  Do  not  give  to  the  middle  man,  or 
agent,  the  power  to  consume  capital,  or  to  rob  the 
laborer ;  if  you  do,  capital  may  charge  all  the  losses 
on  labor,  which  may  have  been  honest  in  effect,  but 
badly  directed.  The  less  intervention  of  credit 
there  is  between  capital  and  labor,  the  better  for 
both  :  the  one  is  endeavoring  to  encourage  indus- 
try,  the  other  to  give  an  honest  increase,  while 
credit  is  a  two-edged  sword  going  between.  Cap- 
ital must  not  be  allowed  to  become  enervated  and 
indolent;  it  must  learn  the  importance  of  infusing 
into  its  offspring  the  economy  that  gave  it  birth,  by 
a  proper  training  in  youth  ;  and  a  familiarity  in  the 
handling  of  the  tools  used  by  labor  will  guard 
against  many  cuts.  It  is  the  want  of  this  early 
training  that  brings  industry  and  economy  into  bad 
repute,  and  which  in  time  will  dissipate  the  accumu- 
lations of  thrift  and  economy. 

I  would  cause  to  be  studied  by  all  the  youths  of 
the  land,  as  their  first  lesson  in  political  economy, 
the  unchangeable  law,  first  promulgated  by  Adam 
Smith,  that  "Labor  was  the  first  price,  the  original 
purchase-money,  paid  for  all  things.  It  was  not  by 
gold  or  silver,  but  by  labor,  that  all  the  wealth  of 
the  world  was  originally  purchased,  and  its  value  to 
those  who  possess  it,  and  to  those  who  want  to  ex- 
change  it   for   some   new  production,  is  precisely 

11 


122  SCIENCE   OF  MONEY. 

equal  to  the  quantity  of  labor  which  it  enables  them 
to  purchase." 

Low  money  prices  are  generally  interpreted  to 
mean  hard  times  and  a  want  of  prosperity;  but  the 
reverse  is  oftener   the    truth.      Large  productions 
are  the   sure   indications  of  thrifty  and  favorable 
harvest,   and   invariably  bring   low  money  values. 
There  can  be  no  better  evidence  of  industry  and  the 
reward  of  the  husbandman   than   abundance;  the 
cry  of  hard  times  and  inadequate  reward  of  labor 
can   be  traced  to  the  too  free  use  of  credit,  which 
unfortunately  remains  the  same,  however  low  the 
prices    may   rule    for   large    productions.      If    the 
money-price  or  legal  tender   required   be  also  an 
article  of  merchandise,  and  be  not  present  with  the 
abundance  of  commodities,  its  value  will    be   en- 
hanced, while  the  surplus  of  other  productions  seek- 
ing a  market  must  sink  to  a  speculative  point  in 
order  to  induce  the  importation  of  this  commodity 
(legal  tender) ;  then  labor,  that  has  promised  a  por- 
tion of  its  earnings,  or  their  value,  in   another  or 
defunct  commodity,  cannot  liquidate  with  a  com- 
parative show  of  equity;  the  tendency  is  to  discour- 
age industry  and  cripple  commerce  and  increase  in 
a  twofold  manner,  first  by  discouragement,  and  then 
by  a  want  of  the  usual  surplus,  to  perpetuate  the 
business  of  exchange  and  trade. 

From  the  best  data  that  have  been  obtained,  the 
circulating  medium  of  a  country  is  equal  in  value 
to  about  one-fifth  of  the  annual  productions.  Then 
three  thousand  millions  of  productions  will  require 
six  hundred  millions  to  effect  the  exchanges  and 


MEDIUM  SHOULD   BE  LEGAL    TENDER.         123 

liquidate  debt,  costing  the  citizens  thirty-six  mil- 
lions annually,  or  six  per  cent,  interest,  this  being 
the  lowest  estimate  that  can  be  placed  on  it.  Now, 
this  is  one  and  one-fifth  per  cent,  on  the  entire  annual 
productions  of  the  interior  country.  A  portion  of 
this  tax  must  be  paid  by  every  man,  woman,  and  child 
that  enters  the  market  with  goods  for  sale  or  debt 
contracted  for  o-oods  exchanged.  If  one-half  of  the 
products  are  consumed  by  the  producer,  the  tax  on 
the  remainder  will  be,  say  two  and  a  half  per  cent., 
or  equal  to  the  usual  commission  for  the  sale  of  raw 
products;  that  is,  equal  to  fifty  cents  per  barrel  on 
pork  and  twenty  cents  on  flour.  As  all  this  tax  is 
on  that  portion  of  commodities  to  be  exchanged 
before  consumption,  it  is  peculiarly  onerous  on  those 
who  make  nothing  for  home  consumption:  that 
portion  of  commodities  consumed  at  the  place  of 
production  pays  no  part  of  the  charge  for  a  medium, 
but  only  that  portion  convertible  by  the  medium. 

The  above  charge  for  a  medium  is  confined  to 
the  internal  affairs  of  the  country,  and  is  to  be 
borne  by  its  exchangeable  products.  That  portion 
of  commodities  for  export,  to  be  used  in  the  pur- 
chase of  imports,  has,  in  addition  to  its  quota  of  the 
domestic  charges,  a  new  set  of  its  own,  growing  out 
of  its  circulating  medium,  bills  of  exchange,  and  that 
portion  of  the  tax  required  to  keep  up  a  reserve  of 
gold  to  be  used  when  called  on  to  liquidate  balances, 
custom-house  dues,  and  other  charges  incident  to 
the  sale  and  conversion  into  other  commodities, 
or  goods  for  home  consumption  :  all  these,  when 
summed  up,  amount  to  no  inconsiderable  sum, — at 


124  SCIENCE   OF  MONEY. 

times  so  large  that  the  entire  value  of  the  venture  is 
consumed,  to  the  discouragement  of  further  pro- 
duction. 

The  reserve  of  gold  necessary  to  insure  an  unin- 
terrupted export  and  import  trade  cannot  well  be 
estimated  at  less  than  one-fourth  the  exports,  say 
$100,000,000.  The  interest  at  six  per  cent,  on  this 
sum,  or  $6,000,000,  is  equal  to  one  and  a  half  per 
cent,  on  $400,000,000.  In  the  case  of  a  gold  circu- 
lating medium,  to  be  used  in  the  interior  of  a  coun- 
try as  its  only  legal  tender,  you  force  these  export 
commodities  to  keep  up  the  circuit  of  the  entire 
medium  of  the  country,  when  it  really  amounts  to 
only  a  portion  of  the  products  to  be  exchanged;  while 
a  well-regulated  internal  legal-tender  circulating  me- 
dium, such  as  I  have  been  advocating,  would  save  to 
the  exports  of  the  country  all  charges  except  its  own, 
freeing  them  from  the  additional  charge  of  not  less 
than  five  per  cent,  for  hunting  up  a  gold  medium 
when  it  is  not  in  sight,  but  absent  at  some  distant 
point,  where,  in  all  probability,  it  is  profitably  em- 
ployed, and,  to  cause  its  withdrawal,  we  must  offer 
large  inducements  and  sacrifices  on  our  exportable 
commodities. 

I  will  now  endeavor  to  show  that  ^production  is 
still  worse  off.  With  a  bank-note  medium  con- 
vertible into  a  legal  tender  gold,  we  will  still 
place  the  needs  at  $600,000,000  for  a  circulating 
medium,  and  allow  the  banks,  as  usual,  to  issue 
three  to  one,  or  hold  in  reserve  $200,000,000.  Now, 
1  contend  that  the  people  are  paying  six  per  cent. 
at  least  on  this  $600,000,000,  and  losing  the  use  of 


MEDIUM  SHOULD   BE  LEGAL    TENDER.         125 

$200,000,000  of  gold  in  sustaining  the  bank-note 
medium;  all  this  is  to  keep  them  from  suspension, 
which,  nevertheless,  we  all  know  will  periodically 
occur,  and  the  losses  from  which  cannot  be  estimated 
at  less  than  thirty-three  and  one-third  per  cent,  every 
ten  years,  two  and  a  half  per  cent,  per  annum  on 
the  entire  paper  circulation. 

Let  us  make  a  summary  of  the  charges  and 
losses  incident  to  a  gold  circulating  medium  and 
legal  tender  for  interior  and  foreign  commerce: 
$600,000,000  at  six  per  cent,  interest  is  $36,000,000 ; 
$200,000,000  for  foreign  trade,  $12,000,000 ;  five  per 
cent,  on  $500,000,000,  $25,000,000;  $73,000,000; 
two  and  a  half  per  cent,  per  annum,  loss  on  a 
convertible  bank-note  medium,  $15,000,000;  an- 
nual loss  incident  to  internal  and  external  trade, 
$88,000,000.  Now,  I  contend  that  with  a  legal- 
tender  medium,  such  as  we  have  indicated  in  the 
foregoing,  $100,000,000  in  a  gold  reserve  will  be 
amply  sufficient  to  take  care  of  all  the  charges 
incident  to  the  exports  of  $400,000,000  and  imports 
of  $400,000,000.  This  is  only  a  running,  constant 
charge,  and  would  give  a  credit  of  $6,000,000  on 
the  $88,000,000,  leaving  a  net  charge  saved  to  the 
industry  of  the  country  of  $82,000,000,  nearly  equal 
to  twenty  per  cent,  on  the  entire  export  trade,  or 
■five  per  cent,  on  the  internal  and  external  exchanges 
of  all  the  commodities  of  the  country  seeking  a 
market. 

In  searching  for  the  great  truth  underlying  the  pros- 
perity of  our  country,  and  the  adoption  of  it  on  the 
exchanges  necessary  to  bring  an  abundance  for  con- 

11* 


126  SCIENCE   OF  MONET. 

sumption  out  of  a  reinvigorated  production,  I  have 
been  compelled  to  weigh  and  verify  the  charges 
surrounding  the  entire  subject,  and  can  the  more 
readily  give  the  foregoing  as  at  least  a  near  approxi- 
mation to  the  loss  incident  to  the  labor  and  industry 
of  man.  This  large  sum  will  be  found  equal  to  the 
charges  on  one-half  of  our  bonded  debt,  and  might 
serve  as  the  nucleus  of  a  sinking  fund  that  in  a 
reasonable  time,  with  demands  of  a  legal-tender  me- 
dium, would  "  wipe  out  the  whole"  and  leave  the 
country  prosperous  and  its  internal  trade  uninter- 
rupted by  the  disturbing  influences  incident  to  all 
circulating  mediums,  if  of  merchandise,  realizing  to 
the  country  the  value  of  the  great  truth  which  I 
asserted  at  the  beginning  of  this  book,  and  freeing 
itself  from  the  curse  that  must  follow  in  the  track 
of  error. 

One  fruitful  source  of  all  our  troubles  and  want 
of  thrift  from  the  use  of  bank-notes  as  a  circulating 
medium,  grows  out  of  the  periodical  pressure  on  the 
issues  for  payment,  causing  the  owners  and  holders 
of  values  to  withdraw  them  from  use,  for  fear  of 
loss  if  trusted  to  the  varying  fortunes  of  the  specu- 
lator on  credits.  So  long  as  these  values,  whether  of 
gold,  pork,  or  flour,  are  withheld  from  circulation  or 
reproduction,  all  the  natural  increase  to  the  country 
has  been  lost.  Give  to  capital  the  necessaries  and 
conveniences  of  labor,  confidence  through  a  uni- 
form and  unchangeable  system  of  security,  and  all 
will  be  made  available  in  reproduction.  No  loss  will 
be  incident  to  hoarding  or  hiding.  If  there  be  those 
fearful  to  credit  themselves,  let  us  not  quarrel  with 


MEDIUM  SHOULD   BE  LEGAL    TENDER.         127 

them, — they  are  the  storekeepers  of  misfortunes 
and  universal  want  by  the  hoarding  up  of  the  sur- 
plus products  of  the  imprudent, — they  are  a  portion 
of  the  great  machinery  of  life,  without  which  there 
would  be  times  when  there  would  be  no  oil  to 
grease  the  parts.  Let  us  be  charitable  and  mag- 
nanimous, and  concede  them  their  day ;  it  is  to  be 
hoped  their  reign  may  be  short,  but  let  it  have 
all  the  eclat  due  to  this  long  obscurity  and  want  of 
consideration  by  the  mass. 

There  has  been  and  continues  to  be  much  specu- 
lation as  to  how  our  large  debt  can  be  paid.  Many 
think,  or  say  without  thinking,  that  it  can,  if  we  have 
ability,  be  done  at  once  or  immediately.  I  admit  we 
could  cancel  the  debt  if  some  unseen  power,  such  as 
Aladdin's  wonderful  lamp,  would  place  us  in  posses- 
sion of  the  legal  tender  gold  to  this  large  amount ;  but 
the  very  application  of  the  money  to  this  purpose 
would  bring  about  such  a  revulsion  in  the  value  of 
gold  that,  from  its  redundancy,  thousands  would 
become  bankrupt,  and  many  of  the  holders  of  the 
bonds  would  be  brought  to  the  verge  of  starvation. 

Gold  may  be  by  law  a  legal  tender  for  debt,  but 
cannot  be  made  to  command  other  values  if,  from 
abundance,  it  should  lose  its  value.  Now  we  will 
take  the  reverse  of  the  picture.  Suppose  this  won- 
derful lamp,  or  unseen  power,  should  place  us  in 
possession  of  the  requisite  amount  of  pork,  flour, 
and  other  commodities  to  discharge  this  debt  at  the 
present  gold  prices  for  the  same;  do  you  suppose 
it  would  command  the  gold  to  an  amount  which 
would  pay  even  the  interest  for  one  or  two  years  ? 


128  SCIENCE   OF  MONEY. 

Both  these  positions  are  strictly  in  accord  with 
the  laws  of  value;  in  the  first  case  of  gold,  the  in- 
justice would  be  unpardonable,  and  in  the  second, 
the  pork,  flour,  etc.  would  become  so  worthless,  for 
want  of  a  legitimate  demand,  that  but  little  of  the 
debt  would  be  discharged. 

Now,  as  nature  has  not  placed  it  in  our  power- to 
make  a  coup  d'etat,  we  will  conform  to  her  laws  and 
have  a  due  regard  to  consumption  and  the  wants  of 
mankind, — not  undertake  to  force  sales  on  the  one 
hand  or  be  unjust  on  the  other;  but  there  is  one 
thing  we  can  do,  without  fear  of  censure  from 
the  creditors,  in  favor  of  the  debtor,  and  that  is,  do 
nothing  that  will  appreciate  gold;  do  not  use  it 
as  a  circulating  medium  and  legal  tender,  nor  hoard 
it  up  from  use ;  when  you  have  it,  throw  it  on  the 
market  and  let  it  seek  investments,— it  will  then 
have  a  chance  to  be  returned  to  us  probably  at  a 
lower  comparative  value  in  exchange  for  our  com- 
modities. 

If  one  or  two  other  large  competitors  for  gold  as 
a  medium  should  discard  it  as  such,  it  may  bring 
about  such  a  state  of  things  that  the  same  amount 
of  mess-pork,  flour,  etc.  received  for  the  bonds  will 
call  them  in  and  cancel  the  debt.  This  state  of  the 
market  will  satisfy  that  portion  of  our  citizens  who 
contend  that  we  did  not  receive  value  for  the  bonds 
when  they  werecissued.  I  am  not  of  that  class,  and 
think  that,  when  all  the  circumstances  surrounding- 
them  are  weighed,  a  different  opinion  will  prevail. 

In  186_\  when  the  legal-tender  act  was  passed,  the 
creditor  portion  of  the  country  had  to  receive  their 


LEGAL    TENDER    TO    BE  ISSUED   FOR    BONDS.      129 

collections  in  the  redundant  depreciated  medium. 
It  was  from  this  class  alone,  holding  the  floating  cap- 
ital, that  purchasers  for  the  bonds  could  be  expected, 
and,  as  they  paid  par  for  them,  they  were  compelled 
to  return  the  value  fixed  on  them  for  debts  due  them 
in  gold. 

There  was  nothing  wrong  in  all  this  on  either  side, 
— the  necessity  of  the  government  was  paramount 
to  all  considerations  of  propriety  or  justice,  and  the 
capitalist  had  to  protect  himself  in  the  best  way  he 
could,  which  was  by  the  exchange  of  a  due  debt 
paid  in  legal  tender  for  a  bond  bearing  on  the  future 
good  fortunes  of  the  country  ;  they  are  now  coming 
around  to  value  received  and  an  adjustment  of  the 
account  on  the  square.  It  is  but  the  verification  of 
the  old  adage  :  u  What  goes  over  the  devil's  back 
will  come  under  his  belly." 


LEGAL  TENDEE  ONLY  TO  BE  ISSUED  FOE  BONDS. 

If  the  position  I  have  taken  became  the  policy 
of  the  government  in  giving  to  the  interior  an  in- 
dependent circulating  medium  and  legal  tender  in 
exchange  for  four  per  cent,  bonds,  as  I  stated  pre- 
viously, no  power  should  be  delegated  to  the  issu- 
ing department  to  go  beyond  this,  nor  give  to  the 
country  one  dollar  in  exchange  for  anything  else, 
not  even  gold.  Why  should  this  article  of  mer- 
chandise   be    dignified   with    the  power  of    specu- 


130  SCIENCE   OF  MONEY. 

lation,  and  mess-pork,  flour,  or  any  other  com- 
modity in  universal  demand,  not  be  admitted  to  the 
same  privilege?  If  this  standard  of  value  or  medium 
of  exchange  is  intended  to  measure  all  values  and 
credit,  and  be  a  legal  tender,  no  commodity  can 
take  its  place  and  be  a  reliable  measure.  The 
moment  you  allow  this  medium  to  be  issued  in  ex- 
change for  any  production,  you  have  completed  the 
exchanges,  and  the  tendency  is  to  debase  the  legal 
standard  by  instituting  a  rivalry  between  com- 
modities. The  principle  I  am  contending  for  ex- 
cludes any  commodity  from  becoming  a  legal  tender 
or  measure. 

It  certainly  looks  very  flattering  and  tempting  to 
have  gold  offered  in  exchange  for  the  medium  or 
legal  tender,  from  the  fact  of  its  easy  conversion 
into  all  other  productions  of  all  countries  and 
nations.  With  me  this  is  one  of  the  very  reasons 
that  would  cause  me  to  exclude  it.  If  you  connect 
it  by  deposit  with  the  issuing  power,  you  at  once 
lock  it  up  and  deprive  reproduction  of  all  the  profits 
and  benefits  that  mio-ht  have  been  derived  from  its 
conversion  into  valuable  implements  for  the  exten- 
sion of  production,  or  deprive  consumption  of  one 
of  its  stimulants  to  renewed  exertion.  I  readily 
admit  there  would  be  no  deterioration  in  bulk,  such 
as  would  be  the  case  if  the  exchange  had  been  for 
mess-pork,  from  the  fact  of  its  liability  to  decay ; 
but  it  would  be  less  liable  to  the  designs  of  thieves 
and  rogues. 

You  may  now  ask,  What  is  to  be  done  with  the 
excess    of    gold    when    it   has   ceased   to   be    used 


LEGAL    TENDER    TO   BE  ISSUED   FOR   BONDS.      131 

as  a  medium  of  exchange?  I  answer,  Convert 
it,  like  all  other  commodities,  and  if  you  have  a 
surplus  over,  unemployed,  buy  our  bonds,  which 
will  help  to  cheapen  the  rate  of  interest.  It  is  the 
unlocking  of  values,  and  bringing  them  into  use, 
that  cheapens  them  in  the  market.  Hoarding  or 
holding,  by  withdrawal  from  sale,  tends  above  all 
other  devices  of  man  to  heighten  comparative 
prices  and  give  them  an  undue  influence  in  the 
hands  of  those  monopolizing  the  market. 

There  is  one  other  serious  objection  to  allowing 
gold  to  be  exchanged  for  the  circulating  medium, 
and  that  is  the  constant  comparison  of  it  with  the 
legal  tender,  and  the  impossibility  of  the  govern- 
ment getting  clear  of  it  without  a  violation  of  one 
of  the  fundamental  principles  underlying  this  entire 
policy,  to  wit,  the  exchange  of  this  gold  for  her 
notes.  This  would  be  the  conversion  into  gold  of 
all  notes  on  demand,  and  would  bring  about  the  an- 
tagonism of  principles  from  which  I  am  laboring  to 
free  the  country.  She  certainly  could  not  pay  it 
out  to  bondholders  without  doing;  great  injustice  to 
those  who  had  invested  in  her  funded  debt,  using 
that  which  did  not  belong  to  her,  and  contracting 
a  new  debt,  which  would  recoil  on  the  holders  of  the 
old,  from  the  undue  complication  with  the  holders 
of  the  circulating  medium,  by  depreciation  of  the 
sum  previously  held,  when  compared  with  the 
amount  actually  needed  to  effect  the  changes  of  the 
interior.  The  true  principle  is  to  allow  every  tub  to 
stand  on  its  own  bottom.  If  any  monopolies  are 
permitted,  let  the  government  retain  them  in  her  own 


132  SCIENCE   OF  MONEY. 

hands  for  the  benefit  and  use  of  the  people.  The  con- 
sumption or  investment  of  gold,  like  that  of  all  other 
commodities,  will  stimulate  production,  giving  to 
man  all  the  instruments  and  devices  of  labor  to  aid 
him  in  effecting  a  surplus,  from  which  alone  can 
come  ability  to  pay  taxes,  and  will  keep  up  her 
revenue  to  a  point  that  will  insure  credit  and  a 
high  degree  of  prosperity. 

No  one  will  deny  that  if  you  take  away  from 
the  factory  the  motive  power,  or  from  the  farm  the 
implements  of  husbandry,  you  have  inflicted  on 
the  country  and  its  labor  a  loss  in  land  and  ma- 
chinery, to  the  extent  of  the  destruction  of  all 
income.  Now,  I  hold  that  if  a  government  has  an 
article  of  value  which,  by  a  simple  exchange,  will 
infuse  new  life  into  this  machinery  and  restore 
to  the  land  its  wonted  increase,  she  has  inflicted  a 
great  wrong  on  labor — especially  if  that  value  is 
a  value  only  when  in  use — by  locking  it  up  in  the 
vaults  of  a  bank,  instead  of  sending  it  to  the  coun- 
try, where  the  implements  can  be  purchased  to  sus- 
tain industry,  and  where  that  value  is  in  demand. 

The  government  has  to  make  good  her  promises 
of  srold  to  the  holders  of  her  bonds  for  interest. 
Let  her  go  on  collecting  from  customs  that  por- 
tion needed  in  the  liquidation  of  debt  in  accordance 
with  the  contract;  let  commerce  and  trade  hunt 
up  such  commodities  as  they  desire  to  deal  in  and 
have  promised  in  the  payment  of  balances ;  let  us 
have  no  undue  influence  in  the  way  of  the  prompt 
and  honorable  fulfillment  of  engagements  by  all 
parties   in  the  basis   of  the  original  contract,  and 


LEGAL    TENDER   TO   BE  ISSUED   FOR   BONDS.     133 

never  legalize  any  illegitimate  competition.  Allow 
the  dealers  in  gold,  like  those  in  other  commodities, 
to  consult  their  own  interest  and  convenience  in  trade 
and  the  division  of  the  profits  in  any  values  in  which 
they  may  desire  to  invest  their  surplus.  If  the  gov- 
ernment undertakes  to  furnish  its  people  with  a  me- 
dium of  exchange  and  liquidation  of  balances,  we 
have  no  claim  on  her  further  than  the  commodities 
to  be  exchanged  by  it.  If  she  has  promised  us 
flour,  we  have  no  right  to  demand  mess-pork  or 
gold.  Before  we  can  have  a  clear  insight  into 
this  position,  we  must  separate  the  medium  from  the 
values  to  be  exchanged  by  it, — the  railway  and  the 
rolling-stock  from  the  commodities  to  be  trans- 
ported over  the  road.  There  can  be  no  objection 
to  the  government  receiving  gold  on  deposit  and 
issuing,  as  at  present,  certificates.  This  will  give 
a  safe,  place  to  those  interested  in  the  trade  to  keep 
it  until  commerce  may  demand  its  withdrawal,  and 
will  save  to  the  import  and  export  trade  a  large  sum 
in  transportation.  It  certainly  would  be  rendering  to 
the  trader  a  great  service  and  facility  in  the  payment 
of  duties,  subjecting  him  to  no  other  expense  than 
that  of  a  cancellation  of  certificates. 


12 


134  SCIENCE   OF  MONEY. 


TRIAL  AND  SUMMAEY. 

After  a  careful  review  of  the  foregoing  investi- 
gations, calling  for  a  change,  as  I  have  attempted  to 
show,  from  error  to  truth,  I  deem  it  just  to  call  a 
general  council  of  the  interests  involved,  in  order  that 
a  statement  may  be  made  of  the  defense  and  argu- 
ment leading  to  a  final  disposition  by  the  highest 
tribunal. 

The  government  of  the  United  States  having 
called  on  the  following  to  make  their  defense,  they 
will  be  heard  in  their  order: 

The  People. 

Gold. 

Domestic  Commerce. 

Foreign  Commerce. 

Balance  of  Trade. 

Cotton. 

Mess-Pork. 

Flour. 

General  Productions. 

Consumption. 

Fixed  Capital. 

Banking. 

Legal  Tender. 

Circulating  Medium. 

Uncle  Sam. — Having  been  called  upon  by  my 
people  to  arbitrate  in  regard  to  a  final  dissolution 
of  the  relations  hitherto  existing  between  certain 
productions,  and  in  order  to  a  better  understanding, 
I  will  first  call  upon  the  people  to  state  their  case. 


TRIAL   AND  SUMMARY.  135 

The  People. — We  have  lately  been  pondering 
over  the  deductions  made  by  one  of  our  number 
from  what  he  claims  to  be  a  great  truth,  or  an 
original  element  underlying  all  our  prosperity.  He 
asserts  that  "  if  the  circulating  medium  and  legal 
tender  of  a  country  be  an  article  of  merchandise 
desirable  for  export,  you  have  inflicted  a  curse  in- 
stead of  a  blessing  on  us,"  and  asks  for  the  disuse 
of  gold  as  a  medium  in  our  domestic  transactions, 
for  the  reason  that  productions  buy  and  exchange 
for  productions,  the  medium  being  conventional, 
and  having  no  other  value  than  what  we  give  it  by 
the  exchange  of  our  products  for  it;  that  our  mess- 
pork  will  purchase  as  much  flour  through  a  medium 
having  no  intrinsic  value,  without  the  relations  of 
the  two  being  disturbed  by  the  intervention  of  a 
third  commodity  like  gold,  arbitrarily  fixing  the 
difference  when  absent  or  present,  and  which  is 
well  known  to  be  liable  to  the  most  violent  fluctua- 
tions, which  often  bring  wide-spread  disaster  in 
their  train. 

If  this  be  true,  and  the  medium  should  have  no 
intrinsic  value,  but  merely  a  relative  one,  all  esti- 
mates would  begin  at  zero.  The  measure  would  not 
only  be  fair,  but  unchangeable, — 0  from  pork  and 
pork  remains,  flour  from  0  and  0  remains ;  all 
values  would  then  have  free  orbits  confined  to  sup- 
ply and  demand,  and  all  excesses  would  gravitate  to- 
ward the  center  in  comparative  value,  and  would 
be  estimated  by  their  utility.  In  view  of  all  these 
facts,  and  the  large  amount  of  mess-pork,  flour,  and 
other  products  we  will  have  to  force  on  foreign  coun- 


136  SCIENCE   OF  MONEY. 

tries  to  purchase  the  large  sum  of  gold  required,  say 
five  hundred  millions,  we  will  not  only  be  embar- 
rassed, but  our  ability  to  make  good  the  maturing 
obligations  you  have  indorsed  for  us,  which  also  call 
for  gold,  will  be  lessened.  To  bring  into  competi- 
tion with  these  engagements  so  disturbing  and  ener- 
vating a  medium  as  gold,  will  only  give  rise  to  com- 
plications, and,  as  we  believe,  inflict  upon  us  a  curse. 
To  enable  us  to  overcome  the  many  difficulties 
besetting  our  path  in  carrying  the  large  debt  now 
upon  our  shoulders,  we  come  forward  in  our  sov- 
ereign capacity  and  pledge  ourselves  jointly  and 
severally  to  the  extinguishment  of  the  last  remain- 
ing vestige  of  debt,  in  the  commodity  stipulated  to  be 
paid,  out  of  our  surplus.  But  in  order  to  do  this, 
we  must  husband  and  economize  our  reserve  for 
reproduction.  The  medium  of  exchange  being  a 
luxury,  and  a  legal  tender  a  necessity,  we  ask  that  you 
indorse  our  joint  notes  to  the  amount  of  our  gold- 
bearing  bonds,  promising  that  you  will  exchange 
these  notes  for  bonds  only,  and,  when  desired,  will 
fund  them  again  into  a  four  per  cent,  gold  promise 
having  thirty  years  to  run  to  maturity  ;  and  we  pledge 
ourselves  to  use  them,  and  no  other  notes,  as  a  me- 
dium in  the  exchange  of  our  productions,  and  to 
receive  them  as  a  lee;al  tender  for  all  debts  due  us. 
As  we  now  need  our  five  hundred  millions  for  a 
medium,  it  will  relieve  you  from  the  collection  of 
the  thirty  millions  of  dollars  required  to  pay  the 
annual  tax  on  the  bonds  that  must  be  canceled  in 
order  to  get  the  legal  tender  and  circulating  medium. 
The  rapid  development  of  this  great  country  and  the 


TRIAL   AND  SUMMARY.  137 

annual  increase  of  oar  productions  will  cause  a  simi- 
lar and  continuous  call  for  these  notes.  Finally, 
we  enjoin  that  the  only  basis  for  these  notes  shall 
be  bonds,  and  that  bonds  can  be  issued  only  on  the 
return  of  the  circulating  notes.  If  you  should  col- 
lect in  any  one  year  more  gold  than  is  necessary  to 
pay  maturing  obligations  in  the  shape  of  interest 
promises,  apply  the  balance  to  the  extinguishment 
of  the  most  onerous  debt  that  you  have  the  privilege 
of  canceling. 

Gold. — I  have  listened,  without  interrupting,  to 
the  remarks  of  the  people,  and  "am  astonished  at 
their  ingratitude  and  their  disposition  to  rob  me  of 
regal  power,  especially  on  the  part  of  those  who 
have  subjected  so  much  territory  to  my  use  and  have 
worshiped  me  so  devotedly.  It  is  but  a  short  time 
since  they  set  me  up  as  a  god  and  ran  me  up  from 
a  man  to  fifteen  men  in  buckram  suits,  because  I 
happened  to  slay  all  the  bulls  and  bears  in  my 
room,  except  the  small  portion  that  escaped  by  the 
side-doors  and  windows ;  even  some  of  these  were 
not  able  to  find  their  way  home,  and  had  to  be 
placed  in  the  mad-house.  In  the  morning,  all  parties 
agreed  that  I  was  worth  one  hundred  and  thirty 
of  your  dear  people,  but  they  declared  before  three 
o'clock  that  I  was  equal  to  one  hundred  and  sixty- 
five,  and  if  it  had  not  been  for  your  untimely  inter- 
ference in  tripping  me  up  I  do  not  know  what  would 
have  been  the  consequences,  nor  how  near  I  might 
have  brought  your  dear  people  to  starvation.  I  can 
readily  see  your  drift:  you  wish  to  rob  me  of  tem- 
poral power,  and  declare  that  I  am  not  infallible. 

12* 


138  SCIENCE   OF  MONEY. 

Well,  have  this  as  you  will,  there  will  be  many  who 
will  still  hoard  me  up  and  continue  their  worship. 
Though  I  shall  publicly  retire  from  your  confidence, 
no  longer  to  be  used  by  the  dirty  hands  of  labor  in 
its  daily  toil,  I  shall  continue  to  pass  through  the 
hands  of  the  silk-glove  gentry,  and,  before  you  get 
to  the  end  of  the  engagements  you  have  for  my  use 
in  the  future,  many  hard  days'  work  will  have  to  be 
performed,  and  still,  as  heretofore, 'many  a  voyage 
around  the  world  in  search  of  me  may  enable  me 
to  lead  you  a  wild-goose  chase  through  many  a  bog 
and  bramble  path. 

Domestic  Trade. — Give  us  a  medium  for  our 
wares  that  will  command  the  productions  of  the 
country,  and  we  will  find  you  a  market  and  bring 
back  calico  or  any  other  commodity  you  desire,  even 
should  it  be  gold.  We  are  disposed  to  think,  after 
all  that  has  been  said  by  the  people,  that  if  they 
have  found  a  substitute  for  five  hundred  millions 
of  dollars,  and  shall  succeed  in  lessening  the  annual 
wants  some  thirty  millions  of  dollars  more,  it  will 
deduct  a  large  percentage  from  the  conventional 
value  of  gold.  Less  of  their  productions  will  be 
required  to  purchase  the  amount  they  may  need 
from  time  to  time  for  any  purpose. 

Foreign  Trade. — We  are  not  alarmed  at  what 
your  people  ask.  It  will  not  lessen  our  profits  ;  but 
if  the  change  adds  to  their  productions,  as  it  cer- 
tainly will  do,  we  can  sell  them  more  goods  and  en- 
hance our  profits  to  that  extent.  There  is  another 
feature  which  appears  very  favorable,  and  that  is, 
when  we  ship  your  products,  we  are  compelled  to  go 


TRIAL   AND   SUMMARY.  139 

to  a  banker  and  dealer  in  bills  of  exchange  and  offer 
him  a  draft  against  the  value,  and  to  purchase  legal 
tenders  or  mediums  for  the  people.  We  have  fre- 
quently been  greatly  inconvenienced  and  embar- 
rassed, owing  to  the  migratory  disposition  of  gold, 
in  finding  the  legal  tender,  and  have  had  to  make 
heavy  sacrifices  of  the  productions,  to  induce  the 
banker  to  part  with  the  medium ;  not  only  this,  but 
we  have  frequently  had  our  operations  limited,  when 
more  extended  shipments  would  have  paid  far  better. 
These  difficulties  in  the  sale  of  exchange  are  not 
only  a  loss  to  the  producer,  but  aifect  the  home 
market,  from  its  influence  on  the  foreign,  bringing 
about  those  sudden  fluctuations  in  prices  that  are 
so  disastrous  to  our  interest. 

Cotton. — One  great  complaint  made  by  the  pro- 
ducers of  export  articles  is,  that  when  the  legal  tender 
or  gold  is  absent  from  the  country  they  are  com- 
pelled to  price  all  their  commodities,  or  compare 
them  with  legal  tender,  in  order  to  get  it,  when  in 
fact  they  only  require  a  small  percentage  with  which 
to  liquidate  debt,  and  might  have  the  balance  to  ex- 
change for  other  merchandise,  such  as  pork,  flour, 
etc.,  which  are  not  influenced  to  the  same  extqnt  by 
the  short  supply  of  gold  in  the  country,  from  the 
fact  that  they  are  consumed  in  and  about  home, 
while  I  have  sutfered  all  the  depression  from  my 
being  an  exportable  article.  If  this  was  all,  it 
might  be  borne  by  me,  as  I  have  at  the  present 
time  a  sort  of  monopoly  from  location,  climate, 
etc.  We  know  the  spinners  reap  no  direct  advan- 
tages from  this  great  loss  of  ours,  but  at  the  same 


140  SCIENCE   OF  MONEY. 

time  it  is  used  as  a  discrimination  against  our  home 
manufactories,  by  the  cheapening  of  the  exchange 
used  in  the  purchase  of  foreign  imports.     The  profit 
to  the  dealer  in  exchange  is  all  that  is  realized  by 
the  country,  except  where  he  is  also  a  foreigner; 
in  that  case  I  am  paying  all  the  losses,  and  my 
people  are  receiving  none  of  the  profits.     You  may 
think  this  difference  in  exchange  that  I  have  paid 
for  a  legal  tender  is  a  small  affair,  but  the  average 
before  the  late  war  was  fully  five  per  cent.     This  on 
a  crop  of  two  hundred  millions  of  dollars  is  no  less 
than   ten    millions    of  dollars  which  I  have   been 
contributing  to  this  despot  gold,  all  of  which  was 
used  as  a  discriminating  duty  against  my  home  fac- 
tories.    Give  me  my  own  notes  in  exchange;  they 
will  cancel  my  debts,  pay  taxes  to  you,  and  realize 
for  me  us  much  mess-pork  as  they  will  exchange  for, 
and  no  questions  will  be  asked  as  to  the  value  of 
gold  in  the  purchase  of  home  productions.     There 
are  only  two  questions  involved :  What  is  the  cost 
in  human  labor?  and,  What  is  the  excess  of  supply 
over  consumption? 

Legal  Tender. — During  the  trying  times  of  the 
late  war  I  was  honored  with  the  position  of  umpire, 
liquidator  of  balances,  and  medium  between  you 
and  the  products  of  your  people;  I  was  hailed  by 
your  soldiers  in  the  field,  however  disastrous  and 
dangerous  the  position,  as  the  messenger  of  good 
tidings:  there  was  not  a  commodity  in  all  the  land 
that  I  could  not  command.  I  am  well  aware  that 
a  greater  power  was  delegated  to  me  than  justice 
would  have  sanctioned,  and  that  I  could  not  hon- 


TRIAL    AND   SUMMARY.  141 

orably  undertake  to  adjust  the  difference  that  had 
been  delegated  to  Q-old.  I  made  no  invidious  com- 
parisons  with  my  rival  in  the  settlement  of  old 
balances,  but  passed  along  as  quietly  as  I  could. 
Although  I  knew  I  was  growing  in  appreciation, 
I  made  no  complaint  against  the  late  decision  con- 
fining me  to  the  times  of  1862,  or  the  day  of  my 
birth ;  in  this  I  cheerfully  acquiesce,  believing  it  a 
just  decision.  The  relations  between  myself  and 
gold  are  every  day  becoming  more  amicable;  never- 
theless, it  will  take  me  some  time  to  forgive  and 
forget  that  last  brick  she  threw  at  my  head,  on  the 
black  Friday  of  September,  1869,  although  it  missed 
its  mark,  and  dealt  some  heavy  blows  among  her 
best  friends. 

If  the  power  is  continued  to  me  as  heretofore,  I 
will  endeavor  not  to  abuse  it  nor  claim  anything 
more  than  the  people  have  delegated  to  me,  which 
i  s  nothing,  or  zero.  I  will  continue  to  award  as  many 
barrels  of  flour  for  one  of  pork  as  the  state  of  the 
market  and  of  supply  and  demand  will  permit,  and 
will  make  no  unjust  discriminations  against  gold  in 
any  case  when  it  is  offered  in  exchange,  especially  as 
we  are  in  need  of  a  considerable  quantity  of  that  arti- 
cle to  make  good  our  old  promises;  so  long  as  my 
people  give  their  surplus  productions  in  exchange 
for  me,  I  will  be  to  them  a  faithful  medium,  and  will 
take  no  umbrage  at  their  exchanging  ten  of  me  for 
one  of  flour,  or  thirty  for  one  of  pork.  The  only  in- 
dication in  that  case  will  be  that  there  has  been  a 
failure  in  the  customary  yield  of  grain,  and  that  the 
cholera  has  been  among  the  hogs.     But  should  only 


142  SCIENCE   OF  MONEY. 

five  dollars  be  demanded  as  the  value  of  flour,  and 
fifteen  dollars  as  that  of  pork,  it  will  be  the  highest 
evidence  of  the  smiles  of  the  Giver  of  all  good  on 
industry  and  labor;  and  should  the  bounteous  pro- 
ductions ever  become  as  free  as  air  and  water,  then 
my  measure  (zero)  will  have  been  reached,  and  all 
will  hail  the  millennium.  There  will  no  longer  be 
any  necessity  for  my  friendly  intervention  as  a  me- 
dium in  the  awards  to  labor  or  capital,  and  my 
career  will  have  ended  in  triumph. 

Balance  of  Trade. — So  much  has  already  been 
said  and  promised  that  I  deem  it  unnecessary  to 
go  further  into  details.  I  will  only  add,  keep  good 
faith,  and  render  to  me  the  surplus  of  productions 
over  consumption  which  I  know  industry  and  econ- 
omy can  call  into  being.  I  will  undertake  to  settle  all 
balances,  and  furnish  to  your  people  all  the  neces- 
saries that  may  be  desired,  together  with  all  the 
gold  you  may  need  in  the  discharge  of  obligations 
you  have  entered  into  on  their  behalf. 

Banks. — We  rejoice  to  find  that  the  change  is 
likely  to  be  inaugurated,  for  we  will  no  longer  be 
called  on  by  the  needy,  the  idle,  the  dissipated,  and 
the  reckless  speculator  for  our  notes,  to  be  used  in 
hunting  up  the  surplus  products  of  labor  and  in  risks 
incident  to  the  clamorous  demand  for  new  loans. 
They  have  been  the  source  of  all  our  troubles,  and 
caused  us  to  inflict  on  labor  all  the  heavy  burdens 
incident  to  the  exchange  of  its  products.  And 
when  we  have  been  unable  to  meet  all  their 
demands  for  legal  tender,  we  have  been  unreason- 
ably set  upon  and  deprived  of  the   provisions  we 


TRIAL  AND   SUMMARY.  143 

had  laid  up  for  the  maintenance  of  our  own  fami- 
lies.    Now  that  legal  tender  has  undertaken  to  look 
up   all   the   surpluses  of  the   country  and  deposit 
them  with  us,  to   be   loaned   to    and   used  by  in- 
dustry, and  by  any  others  who  may  give  securities 
for  their  return,  when  these  values  are  placed  on 
deposit  with  us  to  be  used  in  the  development  of 
the  country's  best  interest,  we  will  feel  sure  not  only 
that  they  are  here,  but  that  they  belong  to  the  people. 
Heretofore,  when  we  gave  our  orders  on  the  country 
for  its  commodities,  and  they  were  not  in  existence, 
they  were  immediately  returned  for  gold  (a  com- 
modity we  were  generally  short  of),  in  order  that 
it  might  be  sent  to  some  other  country  to  insure 
compliance  with  the  terms  of  the  order.     All  this, 
in  times  of  a  greater  desire  to  speculate  than  to  pro- 
duce, coupled  with  short  productions,  caused  us  great 
uneasiness,  and  disposed  us  to  think  hard  of  your 
people.     But  now,  being  relieved  of  this  burden 
of  importing   and   hunting   up    gold,   we   feel   se- 
cure, and  for  the  future  will  find  our  interest  in 
the  loan  of  capital  to  industry.     When  we  look  at 
the  small  dividends  of  the  Bank  of  England,  some 
six  or  eight  per  cent,  per  annum,  and    the  large 
returns  (thirty  per  cent,  or  more)  realized  by  the 
banks  not  called  on  to  issue  notes  or  orders  on  the 
country,  we  feel  compelled  by  self-interest  and  se- 
curity to  exert  our  utmost  influence  in  carrying  out 
the  wishes  of  the  people.     From  the  above  we  would 
by  no  means  have  you  think  we  have  not  made  a 
good  thing  out  of  getting  interest  on  your  bonds, 
and  your  indorsement  of  our  notes  free  of  charge, 


144  SCIENCE   OF  MONET. 

all  of  which  commanded  the  values  in  the  country 
equal  with  your  own  notes.  But,  as  we  will  no 
longer  have  to  provide  this  little  joker  gold,  we  prefer 
to  make  our  bow  and  retain  our  gains. 

Uncle  Sam. — I  see  some  disorder  and  commotion 
in  this  hall,  occasioned  by  the  unceremonious  depart- 
ure of  the  idle,  the  dissipated,  the  reckless  speculator 
and  gambler,  and  can  distinguish  such  mutterings 
as,  "  If  there  are  to  be  no  more  wild-cat  banks,  if 
all  the  prizes  are  to  be  drawn  by  industry  and  econ- 
omy, and  if  nothing  is  promised  to  those  who  look 
to  other  men's  labor  and  to  their  own  wits  for  a 
living,  it  is  time  for  us  to  be  off,  avoiding  such  un- 
holy combinations  against  those  who  by  nature  have 
no  inclination  for  work."  So  soon  as  order  is  re- 
stored, I  will  endeavor  to  sum  up  the  facts  and  evi- 
dence in  the  case,  and  give  you  my  opinion  and 
views. 

All  power  is  derived  from  the  people ;  it  is  to  their 
industry  and  economy  that  we  are  indebted  for  a  sur- 
plus of  productions  over  consumption.  Without  this 
surplus  of  the  necessaries,  conveniences,  luxuries, 
and  amusements  of  life,  the  bondholders  would  be 
unable  to  fulfill  their  promises,  I  would  be  unable 
to  fulfill  mine  ;  and  national  ruin  would  ensue. 

When  the  people  call  into  existence  this  surplus 
and  use  it  as  a  legal  tender  for  the  extinguishment 
of  contracts,  it  is  the  highest  evidence  that  can  be 
given  of  their  honor  and  integrity.  Nor  can  I  see 
why  they  should  not  be  suffered  to  go  on  and  pros- 
per in  their  own  way;  no  one  has  any  right  to  heap 
upon  their  shoulders  unnecessary  burdens.     If  they 


PRODUCTION  AND  ITS  DRAWBACKS.  145 

desire  domestic  institutions  instead  of  imported  ones, 
they  have  a  right  to  their  preferences,  especially  if 
they  think  the  importation  of  the  foreign  would  in- 
troduce a  pest,  and  a  continual  wrangling.  "  Let  us 
have  peace,"  whose  victories,  as  the  poet  says,  are 
no  less  renowned  than  those  of  war.  If  there  be  any 
so  wedded  to  Mammon  as  to  desire  gold  promises 
only,  there  will  be  no  objection. 

Foreign  exchange  has  now  her  own  medium  (bills 
of  exchange,  etc.),  which  is  used  not  only  as  a  me- 
dium but  as  a  legal  tender  and  purchasing  power, 
and  she  declines  having  anything  to  do  with  the 
changes  contemplated  in  our  internal  affairs.  Her 
desire  is  that  surplus  commodities  shall  be  exchanged 
for  productions,  giving  a  profit  on  the  inward  as  well 
as  the  outward  venture/by  which  process  her  gains 
will  be  doubled  and  still  greater  security  given  to 
her  operations. 


PRODUCTION  AND  ITS  DRAWBACKS. 

The  leading  interest  of  all  countries  is  production. 
To  increase  this,  due  stimulus  must  be  given  to  in- 
dustry, and  economy  must  be  infused  into  every 
avenue  of  consumption,  that  there  may  be  annually 
an  increase  of  commodities  for  sale  or  exchange. 
Stationary  production  will  soon  be  overtaken  by 
population,  and  in  years  of  adversity  want  and 
misery  will  ensue. 

Retrograding   production  tends  to  force  on   the 

13 


146  SCIENCE   OF  MONEY. 

poor  decreasing  quantities  and  qualities  of  food,  till 
at  last  death  comes  to  their  relief.  Wot  so  with 
increasing  production  :  the  daily  wants  of  the  masses 
annually  expand,  and  the  luxuries  of  one  year  be- 
come the  necessaries  of  the  next,  banishing  misery 
from  the  land  and  elevating  the  people  to  greater 
heights  of  prosperity  and  security  against  the  day  of 
adversity. 

When  that  day  does  come,  they  have  a  reserve  to 
look  to  with  which  they  can  bridge  over  the  unpro- 
pitious  season.  It  is  only  in  agricultural  countries 
that  complete  immunity  can  be  found  from  extreme 
want.  The  manufacturing  interests  cannot  hold  out 
a  certain  promise  against  the  day  of  shortness  in  the 
general  supply  of  food.  People  can  wear  old  clothes, 
but  they  cannot  eat  yesterday's  dinner.  Agricul- 
ture, manufactures,  and  commerce  go  well  together 
in  times  of  prosperity,  but  when  adversity  comes 
there  is  a  pot  but  nothing  to  boil  in  it.  Hunger  can- 
not admit  of  the  delay  incident  to  trade, — cannot 
wait  for  the  purchase  of  food  with  the  wares  of  the 
factory;  hence  the  great  necessity,  which  should 
never  be  lost  sight  of  by  any  government,  of  allow- 
ing nothing  to  retard  the  agricultural  interest, — that 
being  the  only  secure  harbor  when  the  storm  is 
raging  without.  I  would  by  no  means  have  it  under- 
stood from  the  above  that  the  younger  members  of 
the  family  should  not  be  favored  and  encouraged; 
but  they  can  only  be  pensioned  off  when  the  accu- 
mulations from  the  entailed  estate  bring  a  surplus; 
economy  in  the  one  will  bring  independence  and 
equality  in  the  other.     In  pointing  out  some  of  the 


PRODUCTION  AND   ITS  DRAWBACKS.  147 

losses  besetting  the  path  of  agriculture,  I  do  not 
wish  to  heap  loads  on  the  backs  of  either  of  the 
other  two  great  interests, — manufactures  and  com- 
merce,—  but  simply  to  defend  production  against 
carrying  the  entire  burden  of  the  circulating  me  - 
dium  of  the  country, — to  protest  against  its  being 
made  to  pay  all  the  losses  incident  to  the  fluctua- 
tions and  perils  of  that  medium, — and  to  insist  that 
the  other  great  interests  should  be  made  to  con- 
tribute in  a  general  average.  On  this  equitable  and 
mutual  plan  I  hope  to  demonstrate  that  the  circu- 
lating medium  of  an  agricultural  country,  of  what- 
ever nature  or  quality,  is  peculiarly  the  property  of 
the  producer,  and  that  all  the  losses,  except  momen- 
tary ones,  are  finally  to  be  paid  by  those  who  made 
it  a  necessity,  without  any  hope  of  participating  in 
the  profits,  if  any.  It  is  as  if  A,  for  the  honor  of 
being  in  a  firm,  should  agree  to  pay  all  the  losses 
of  the  bad  years,  and  let  B  and  C  divide  the  profits 
of  the  good  ones. 

Commerce,  with  its  head-light,  looks  far  out  to 
sea,  and  when  going  into  port  she  can,  if  necessary, 
take  on  board  a  pilot.  Her  facilities  are  such,  from 
her  position  and  intercourse  with  nations,  that  she 
has  invented  a  peculiar  alphabet,  by  which  she  can 
interpret  the  wants  of  others  and  supply  her  own. 
Her  circulating  medium,  bills  of  exchange,  checks, 
credit,  etc.  are  manufactured  to  suit  her  conve- 
nience. If  the  trader  gets  possession  of  a  portion 
of  the  circulating  medium  of  a  country,  he  only 
receives  it  at  its  comparative  exchangeable  value 
with  the  products  of  that  country;  he  instantly  parts 


148  SCIENCE   OF  MONEY. 

with  it  in  payment  of  former  purchases,  or  invests  it 
in  new  ones.  His  chance  of  loss  by  depreciation  is 
about  equal  to  that  of  being  struck  by  lightning. 
Not  so  with  the-  confiding  producer  with  no  debts 
to  pay ;  he  has  no  resource,  but  must  pocket  the 
loss,  whatever  it  may  be.  In  this  way  nine-tenths 
of  the  losses  incident  to  a  circulating  medium  are 
distributed  over  the  agricultural  portion  of  the 
country;  while  the  banker  or  dealer  in  money,  in 
times  of  fear  and  peril,  invests  his  reserve  in  bills 
of  exchange,  calling  for  some  other  medium  pre- 
dicated upon  the  produce  of  the  country.  In  this 
manner  all  is  worked  back  on  the  productive  in- 
terests of  the  country — on  the  gross  produce — the 
manufacturer  participating  sparingly  in  the  depre- 
ciation, from  the  fact  that  the  trader,  like  the  rail- 
road train,  carries  a  front  and  back  light,  warning 
those  nearest  to  him  to  look  out. 

If  this  position  as  to  the  true  tendency  of  the 
money  of  account  be  correct,  is  it  not  the  duty  of 
the  government  that  has  the  power  to  regulate  the 
currency  and  medium  of  value  to  furnish,  to  those 
who  have  the  losses  to  pay,  such  a  standard  and  legal 
tender  as  they  can  at  all  times  have  in  sight — one 
that  always  carries  its  own  light  and  fog  signals?  If 
the  loss  or  depreciation  does  come,  it  will  be  in 
such  a  medium  as  they  have  a  common  interest  in, 
and,  though  inconvenient  at  the  moment  to  foot  up 
in  bulk,  the  consolation  that  they  have  finally  to 
work  it  out  will  be  some  set-off  to  the  summary 
process  of  payment.  When  it  finally  goes  down 
and  becomes  worthless,  they  can  still  fall  back  on 


CIRCULATING  MEDIUM  AND   LEGAL    TENDER.    149 

first  principles, — the  products  of  the  field, — without 
which  manufacture  and  commerce  cannot  exist  for 
one  moment.  With  it,  to  an  amount  sufficient  for 
one  year's  support  of  labor,  prosperity  will  again 
come  to  the  aid  of  its  handmaids  and  copartners  in 
production. 


OIKCULATLTC  MEDIUM  AND  LEGAL  TENDEE. 

It  being  conceded  that  a  circulating  medium  and 
legal  tender  is  a  necessity,  in  a  country  which  has 
commodities  to  exchange,  you  have  but  to  limit 
this  to  the  actual  requirements  of  production  and 
consumption  to  invest  it  with  all  the  values  belong- 
ing to  the  commodities  to  be  exchanged.  From  this 
moment  it  has  a  new  and,  it  might  be  said,  an 
intrinsic  value  coequal  with  the  exchange  it  can 
effect,  and  all  nations  desiring  those  particular  com- 
modities will  associate  in  their  estimates  the  values 
not  of  the  medium,  but  of  the  goods  it  will  pur- 
chase. If  a  country  wills  that  its  productions 
have  no  more  value  than  the  medium,  or  that  so 
much  will  be  given  in  exchange,  from  that  moment 
the  medium  or  standard  becomes  of  equal  value 
with  the  commodities  it  will  exchange  for.  Values 
measure  the  medium,  and  the  medium  measures 
values.  Necessity,  after  all,  is  the  governing  law, 
and  without  a  desire  this  necessity  would  not  be 
produced.  The  moment  you  clothe  the  medium 
with  a  purchasing  power,  it  will  have  the  same 
value  as  the  goods  that  will  purchase  it,  and  it  will 

13* 


150  SCIENCE   OF  MONEY. 

be  so  invested  with  value  by  all  countries  connected 
with  the  purchase,  sale,  and  consumption  of  the 
commodities  that  can  be  had  in  exchange  for  it. 
From  this  moment  it  has,  and  with  all  the  world, 
the  values  that  are  given  to  the  particular  commo- 
dities of  that  country. 

In  addition  to  the  foregoing  values  credited  to  a 
particular  medium,  when  it  has  performed  this  office 
andibeen  invested  with  the  power  of  a  legal  tender, 
all  creditors  become  its  friends  and  advocates,  which 
is  calculated  still  further  to  enhance  the  value. 
When  the  creditor  parted  with  his  goods  for  the 
promise  of  this  particular  legal  tender,  he  affixed 
to  it  the  values  of  the  commodities  for  which  it 
would  exchange ;  and,  as  the  recipient  of  the  me- 
dium is  not  likely  to  undervalue  it,  it  may  be  taken 
for  granted  that  he  who  is  compelled  to  receive  it 
as  a  legal  tender  will  not  lend  himself  to  its  depre- 
ciation. All  legal  tenders  and  mediums  are  con- 
ventional, and  no  law  can  invest  them  with  a  greater 
value  than  the  commodities  that  can  be  had  in 
exchange  for  them. 

Bonds  and  time  obligations  have  not  this  present 
value  of  the  medium,  but  are  measured  by  the 
future  promise  of  return.  The  medium  of  exchange 
is  provision  stored  up  for  daily  consumption;  time 
obligations  are  promises  of  the  future,  and  are 
valued  by  the  certainty  of  a  return.  The  value 
of  time  obligations  is  measured  by  their  present 
worth;  if  discounted,  the  rate  of  discount  will  be 
fixed  in  accordance  with  the  security  given  and 
the  certainty  of  return  of  the  legal  tender.     If  this 


CIRCULATING   MEDIUM  AND   LEGAL    TENDER.    151 

obligation  be  gold,  you  instantly  turn  over  in  your 
mind  the  amount  of  commodities  it  will  purchase 
to  aid  reproduction.  Should  it  happen  that  this 
commodity,  gold,  will  not  command  the  necessa- 
ries and  conveniences  for  sustaining  labor,  it  loses 
its  value,  and  its  mining  must  cease.  After  all, 
you  must  go  back  to  the  universal  standard  for  a 
measure  of  values  as  well  as  of  legal  tender,  and 
that  is  the  sustaining  power  of  human  labor,  and 
that  labor,  again,  must  be  measured  by  the  surplus 
it  can  produce  over  consumption.  Now,  as  all 
values  are  comparative,  the  same  process  of  reason- 
ing will  be  gone  through  to  get  at  the  value  of  a 
circulating  medium  and  legal  tender.  How  much 
of  the  surplus  of  others  will  it  command?  How 
much  pork,  flour,  etc.?  If  this  amount  be  in  quan- 
tity equal  to  what  gold  will  purchase,  then  the 
values  are  the  same. 

If  gold  be  the  legal  tender  and  circulating  medium 
of  a  country,  it  may  become  redundant,  and  be 
compelled  to  seek  markets  offering  greater  induce- 
ments. When  this  is  the  case,  the  speculations 
of  the  home  market,  and  orders  of  foreigners  for 
their  balances,  may  so  narrow  down  the  circulating 
medium  that  those  who  desire  a  legal  tender  will  be 
so  inconvenienced  that  they  may  have  to  sacrifice 
their  commodities  or  property.  This  overstocking 
the  market  with  circulating  medium,  followed  by 
its  sudden  withdrawal,  from  whatever  cause,  is  one 
fruitful  source  of  all  our  troubles  and  misfortunes. 
Now,  if  you  add  to  this  a  depreciation  of  the  circu- 
lating medium  of  credits  that  are  not  legal  tenders, 


152  SCIENCE   OF  MONEY. 

you  have  doubled  the  distress,  from  the  fact  that 
you  have  destroyed  by  failure  a  percentage  of  the 
circulating  medium  at  one  time  relied  on  to  per- 
form the  office  of  a  legal  tender,  while  the  balance 
is  seeking  speculations  in  other  countries.  Can 
this  state  of  things  be  desirable  ?  Can  anything  but 
periodical  bankruptcy  and  universal  distress  follow  ? 
Let  the  circulating  medium  and  legal  tender  of  our 
country  be,  as  we  desire  our  government  to  be,  "one 
and  indivisible:"  the  greatest  good  will  then  have 
been  conferred  on  the  greatest  number. 

It  will  be  readily  seen  from  the  foregoing  that  a 
depreciation  of  the  circulating  medium  is  not  unlike 
a  failure  of  all  the  sources  of  production.  All  have 
been  sacrificed  at  the  same  time  (by  the  receipt  of  a 
worthless  medium) ;  but  if  this  medium  had  been 
fixed  to  remain  a  legal  tender  in  the  liquidation 
of  debt,  the  distress  from  all  causes  could  only  be 
equal  to  the  failure  of  one  commodity,  confined 
to  the  unfortunates  who  were  engaged  in  its  pro- 
duction. Is  not  this  state  of  things  preferable  to 
universal  stagnation  and  loss  from  the  worthlessness 
of  a  medium  that  had  forced  all  values  from  the 
country  during  its  period  of  prosperity? 

No  currency  or  circulating  medium,  whether  of 
gold  or  paper,  can  be  kept  uniform  or  stable  when 
used  in  common  by  all  countries,  if  the  values  of 
the  productions  of  one  country  differ  from  those  of 
the  same  productions  in  another  country.  It  is  what 
the  medium  will  buy  that  gives  it  value.  Then  why 
seek  for  an  intrinsic  value  in  a  medium  that  must 
in  its  turn  be  measured  by  all  other  values? 


CIRCULATING   MEDIUM  AND  LEGAL    TENDER.    153 

The  scales  by  which  standards  are  tested  and 
produce  is  weighed  have  no  value  in  themselves,  as 
compared  with  the  commodities  gauged.  It  is  not 
necessary  for  them  to  be  made  of  gold:  all  that 
is  wanted  is  accuracy.  If  I  place  on  one  side  pro- 
ductions, and  you  place  on  the  other  circulating  me- 
dium to  balance,  then,  when  debt  takes  the  place  of 
produce,  I  wish  to  see  no  vibration.  If  more  of  the 
medium  be  required,  let  more  of  debt  be  canceled. 
To  illustrate  further,  suppose  the  grain  crops  to 
fail  in  a  country  whose  circulating  medium  and 
legal  tender  is  gold;  those  who  are  in  want  of  bread 
must  have  it,  at  whatever  sacrifice.  Nothing  but 
gold  for  the  moment  will  purchase  it  from  a  foreign 
country.  No  sooner  do  you  begin  to  send  oif  gold 
than  all  credit  begins  to  contract.  The  people  are 
being  deprived  of  a  circulating  medium  and  legal 
tender  at  the  same  time,  the  absence  of  either  of 
which  must  derange  all  trade;  and  the  pressure 
is  intensified  by  the  universal  disposition  to  hoard 
up  the  legal  tender  for  a  period  of  greater  profit  or 
for  additional  security  in  meeting  maturing  obli- 
gations. All  this  inconvenience  and  distress  can 
be  bridged  over,  and  production  will,  sooner  or 
later,  unlock  the  hoards  of  legal  tender  and  cir- 
culating medium  ;  but  it  is  very  different  if  the 
circulating  medium  be  bank-notes,  not  legal  tender, 
but  convertible  into  gold  on  demand.  This  privi- 
lege will  not  give  security  from  an  undue  quantity 
being  placed  in  the  market.  When  the  reaction 
begins,  all  are  sensible  of  the  fact,  but  it  is  too 
late  to  save  all  the  paraphernalia  of  trade.     The 


154  SCIENCE   OF  MONET. 

greatest  losses  and  calamities  ever  inflicted  on  this 
country  have  been  from  the  issue  of  spurious  and 
worthless  paper  money,  forced  for  a  time,  through 
public  opinion,  to  usurp  the  place  of  commodities 
and  a  legal  tender,  and  when  stripped  of  this  sus- 
taining power,  not  worth,  in  the  liquidation  of  debt, 
the  paper  it  was  printed  on.  It  is  the  desire  to  put 
a  stop  to  this  evil  in  the  future,  by  the  suppression 
of  all  local  issues  to  be  called  money,  that  prompts 
the  foregoing  investigations,  and  not,  as  I  have 
already  stated,  a  wish  to  put  property  in  any  man's 
possession  in  any  other  way  than  by  honest  industry 
and  for  value  received.  This  can  be  accomplished 
only  through  a  well-established  currency,  and  this 
can  be  attained  only  by  confining  the  issue  to  one 
source,  and  that  must  be  the  government,  the  power 
that  has  the  regulating  of  the  legal  tender  and  stand- 
ard of  value.  I  can  see  no  other  reason  for  the  in- 
fatuation for  a  universal  gold  medium  than  the 
indisposition  of  nations  to  learn  and  their  reluctance 
to  change.  Slow  and  sure  maybe  the  safest  rule  of 
conduct  in  a  general  way,  but  when  an  artery  is  to 
be  taken  up,  let  us  have  skill  and  dispatch,  that  the 
patient  may  not  bleed  to  death. 


PRODUCTION  AND    CIRCULATING   MEDIUM.      155 


PRODUCTION  AND  CIRCULATING-  MEDIUM. 

Advocating,  as  I  have  been,  the  great  producing 
interest  of  the  country,  and  claiming  for  it  a  fair 
share  of  legal  protection,  I  only  ask  that  it  be  ex- 
empted from  all  complications  other  than  its  own, 
by  the  establishment  of  a  legal-tender  medium  inde- 
pendent of  the  complications  growing  out  of  the 
daily  speculations  in  gold,  heretofore  the  universal 
standard  of  value.  If  it  be  conceded  that  produc- 
tion is  the  source  of  all  prosperity,  without  which  no 
taxes  can  be  collected,  and  uo  credit  be  permanent, 
it  must  be  acknowledged  that  it  is  the  duty  of  the 
government  to  throw  no  stumbling-blocks  in  its  way. 

It  is  argued  by  many  that  if  we  are  to  have  a  cir- 
culating legal-tender  medium  not  convertible  on 
demand,  the  fluctuations  will  be  the  same  as  those 
attending  gold.  Suppose  this  should  be  the  case, 
who  will  be  the  sufferer  ?  Will  it  be  the  producer, 
or  the  consumer? 

If  speculation  conspires  to  give  to  the  medium 
more  than  its  true  relative  value,  the  productions  of 
those  who  are  not  in  debt  need  not  be  exchanged, 
and  the  market  cau  thus  be  left  entirely  to  those 
who  are  in  want  of  a  legal  tender  to  meet  their 
maturing  obligations.  Those  who  desire  a  medium 
of  exchange,  and  are  not  in  want  of  legal  tenders, 
can  wait  until  a  legitimate  demand  arises  for  the 
exchange  of  their  products. 

Let  us  now  suppose  the  reverse  of  this  state  of 
the  markets.     When  combinations  of  capital  have 


156  SCIENCE   OF  MONEY. 

depressed  or,  for  the  moment,  destroyed  the  true 
relative  value  of  the  circulating  medium,  —  when 
but  few  are  in  absolute  need  of  a  legal  tender,  and 
desire  only  a  medium  of  exchange  on  new  credit 
to  realize  the  visions  of  inordinate  gain, — specula- 
tion will  act  as  a  stimulus  to  increased  production, 
giving  to  those  in  want  of  a  legal  tender  relief  from 
maturing  obligations;  operating,  in  fact,  as  a  sort 
of  bankrupt  law,  since,  by  a  surrender  of  assets 
at  the  enhanced  price,  they  can  pay  out  to  the 
producer  not  in  want  of  a  legal  tender,  but  of  the 
medium  of  exchange,  as  he  has  only  to  wait  for  the 
reaction,  and  the  full  relative  value  of  the  medium 
will  be  realized. 

Let  it  be  understood,  all  this  is  on  the  supposi- 
tion that  the  issuing  power  of  the  legal  tender  is 
unchangeable,  and  that  no  inflation  has  occurred 
to  give  a  different  relative  value  to  the  medium 
and  the  production.  The  reaction  will  certainly 
come  when  the  fever  of  speculation  has  run  its 
course  and  past  credits  begin  to  mature.  However 
or  whenever  the  circulating  medium,  if  a  legal 
tender,  may  lend  itself  to  credit  and  speculation, 
production  will  still  go  on  accumulating  and  laying 
up  for  the  day  of  adversity.  The  howling  of  the 
wolves  is  but  evidence  that  the  sheep  are  close  at 
hand;  the  prudent  owner  will  take  measures  to 
gather  his  flock  into  a  place  of  security. 


CIRCULATING   MEDIUM  A    NECESSITY.  157 


CIRCULATING-  MEDIUM  A  NECESSITY. 

I  do  not  think  there  can  be  any  controversy  as  to 
the  necessity  of  a  circulating  medium  and  measure 
of  value,  or  legal  tender,  for  those  who  have  incurred 
debt  and  desire  to  discharge  it.  The  capitalist  must 
be  aware  that  no  measure  of  value  can  be  found  which 
will  at  all  times  give  him  the  same  amount  or  bulk 
of  production.  Gold  will  not  do  it;  in  one  country 
alone  the  value  of  annuities  fell  from  one  hundred 
dollars  to  twenty-five  dollars,  owing  to  the  great 
increase  in  the  production  of  the  standard.  All  are 
alike  deeply  interested  in  the  question  of  finding  the 
standard  or  medium  least  liable  to  fluctuation,  or 
which,  after  fluctuation,  shall  have  the  power  to 
command  the  largest  amount  of  human  productions 
that  are  necessary  to  command  labor. 

If  this  be  the  true  position  of  productive  labor 
and  commerce  to  the  currency  and  legal  tender,  it 
is  all-important  that  this  medium  should  be  protected 
from  fluctuations  by  the  government  as  far  as  that 
can  be  done.  The  daily  fluctuation  incident  to  every 
medium  of  exchange  should  have  no  weight  or  in- 
fluence. A  promise  by  the  government  of  so  much 
gold  semi-annually  may,  at  the  end  of  twenty  years, 
command  as  many  days'  labor  as  when  first  issued  ; 
the  difference  between  the  present  value  of  gold  and 
its  value  twenty  years  hence  is  only  a  matter  of 
speculation  on  the  part  of  the  capitalist. 

Gold,  like  all  other  commodities,  is  liable  to  rise 
or  fall  in  value.     The  tendency,  for  more  than  one 

14 


158  SCIENCE   OF  MONEY. 

hundred  years,  has  been  to  drop  it  as  a  circulating 
medium  in  the  exchange  of  products.  Now,  should 
fashion,  which  is  as  changeable  as  the  wind,  also 
discard  it,  in  famine  times,  mess-pork  or  flour  may 
be  looked  upon  as  having  much  more  permanent 
value.  The  losses  resulting  from  these  fluctuations 
should  not  be  visited  upon  production,  the  great 
builder-up  of  human  existence  and  repairer  of  the 
natural  decay  of  time.  However  prosperity  or  ad- 
versity may  mingle  together,  in  the  absence  of  pro- 
duction the  one  cannot  last,  nor  can  the  pangs  of 
the  other  be  mitigated, — it  is  the  alpha  and  omega 
with  a  great  controlling  interest  like  this,  the  foun- 
dation of  all  others,  without  which  there  would  be 
no  need  of  a  circulating  medium.  How  can  the 
government  be  content  to  see  inflicted  upon  it  all 
the  ills  of  a  vitiated  system  of  currency  for  the  cir- 
culation of  its  products,  whose  very  existence  and 
earnings  depend  on  the  contributions  from  its  sur- 
plus, whose  mistakes  and  losses  are  but  a  forced 
levy  on  its  enterprise,  and  which,  when  prosperity 
crowns  the  effort,  divides  none  of  the  profits  with 
those  who  paid  the  losses  in  times  of  adversity? 

It  is  now  in  the  power  of  the  government  to  con- 
sult her  own  interest,  and  furnish  the  producer 
with  a  legal  tender  that  will  be  uniform  in  all  parts 
of  the  country,  that  will  circulate  without  discount, 
and  command  the  fruits  of  industry  wherever  found. 
All  will  understand,  when  reading  the  quotations  of 
pork,  flour,  etc.  in  Chicago  or  New  Orleans,  that 
one  and  the  same  value  is  meant,  in  comparison 
with   the  medium  ;    there  is  now  no   hesitancy  or 


CIRCULATING  MEDIUM  A   NECESSITY.  159 

scruple  in  regard  to  the  medium  we  have:  all  the 
producers  ask  is  a  continuance.  The  profits  and 
security  will  all  be  on  their  side;  and  if  repudiation 
from  inability  should  ever  come,  which  no  one  con- 
versant with  the  great  prosperity  and  increasing 
productions  of  the  country  can  suspect  for  a  moment, 
the  loss  will  fall  on  those  who  reaped  the  benefit  of 
the  profit. 

I  can  imagine  but  one  influence  that  can  possibly 
cause  the  government  to  adopt  principles  antago- 
nistic to  the  interest  of  its  people, — an  overweening 
regard  for  what  Mrs.  Grundy  will  say ;  this  may 
drive  her  into  some  wild  scheme  and  repudiation  of 
what  she  has  already  inaugurated.  The  holders  of 
our  bonds,  if  they  will  consult  their  own  immediate 
and  future  interests,  cannot  but  sanction  a  policy 
that  will  give  to  them  a  fixed  and  secure  invest- 
ment in  strict  accordance  with  the  original  contract. 
What  more  can  they  ask  than  their  principal  and 
interest  in  gold  at  the  stipulated  terms  ?  All  the  dif- 
ficulties attending  the  time  of  payment,  or  as  to  the 
kind  of  commodity  it  may  be  in,  will  be  removed; 
it  is  true  it  will  be  deprived  of  the  quality  favored 
by  the  speculator  and  gambler  in  value,  but  it  will 
possess  all  the  requisites  of  security  that  are  neces- 
sary to  bring  it  into  favor  with  capital ;  it  is  to  this 
great  interest  we  should  appeal,  it  is  from  it  we 
receive  real  value  in  exchange  for  our  promises,  and 
by  its  means  we  hope  to  rebuild  our  wasted  fortunes 
and  cause  each  way-spot  to  be  clothed  in  verdure. 


160  SCIENCE   OF  MONEY. 


LEGAL  TENDEK,  BALANCE  OF  TEADE,  COTTON 

CKOP,  ETC. 

In  order  to  a  full  and  perfect  understanding  of 
our  subject,  it  is  incumbent  on  us  to  go  back  to 
the  beginning  and  demonstrate  the  difference  be- 
tween cause  and  effect.  If  there  was  no  credit  there 
would  be  no  need  for  a  legal  tender.  By  the  disposi- 
tion to  gain  and  to  use  all  your  surplus  in  reproduc- 
tion, you  are  influenced  to  lend  it  to  those  who  have 
not  this  surplus.  From  this  springs  the  law  of  legal 
tender,  in  order  to  enforce  a  full  liquidation  of  the 
credit. 

If  it  is  gold  we  have  promised  as  the  legal  tender, 
in  order  to  obtain  it  we  are  compelled  to  submit  to 
the  universal  and  unchangeable  law  of  trade,  to 
wit,  offer  our  goods  at  such  prices  to  those  that  have 
gold  as  will  induce  them  to  part  with  it.  When  I 
speak  of  offering  our  goods  to  a  country  desiring 
them  more  than  gold,  I  wish  to  be  understood  as 
including  the  trader  with  that  particular  country. 
In  fact  he  is,  for  the  time  being,  the  representative 
of  that  particular  country,  so  far  as  trade  is  con- 
cerned. It  is  this  desire  for  gold  on  our  part,  and 
the  commodity  on  the  spot  at  the  moment  of  our 
want,  that  I  am  endeavoring  to  obviate,  and  thus 
save  to  the  producer  the  loss  attending  the  delay  of 
importation,  which  loss  is  never  measured  by  real 
value  or  utility,  but  by  the  inexorable  law  of  present 
necessity. 

There  is  not  one  transaction  in  oue  thousand  of  our 


LEGAL   TENDER,  BALANCE   OF  TRADE,  ETC.     \Q\ 

internal  affairs  calling  for  legal  tender  in  liquidation 
that  has  the  remotest  connection  with  our  foreign 
exchanges;  it  is  to  save  to  the  country  the  losses 
incident  to  the  nine  hundred  and  ninety-nine  trans- 
actions that  I  am  now  laboring.  The  internal  com- 
merce of  a  country  adjusts  itself  to  its  own  wants  if 
allowed  free  intercourse  with  the  foreign,  but  if  fet- 
tered with  derangements  or  complications  of  the 
merchant  or  trader,  it  so  mixes  up  the  one  with  the 
other  that  the  original  producer  is  always  made  the 
scapegoat,  or  sufferer.  It  is  independence  I  ask  for, 
and  that  foreign  commerce  shall  make  good  its  own 
promises  in  its  own  way,  and  not  hold  the  circulating 
medium  of  the  producers  in  the  interior  responsible 
for  the  losses  of  the  trader.  If  he  is  so  imprudent 
as  to  promise  a  commodity  not  in  the  country,  it  is 
no  reason  why  the  producers  of  all  other  commodi- 
ties should  be  forced  to  promise  the  same.  It  is  as 
much  to  the  interest  of  the  party  having  capital  to 
lend  it,  as  it  is  to  that  of  the  borrower  to  receive  it ; 
both  are  for  a  consideration.  Why,  then,  legislate  for 
a  liquidator  in  favor  of  the  one  and  not  the  other  ? 

AIT  countries  and  all  states  have  enacted  laws  to 
stave  off  or  complicate  the  collection  of  debt;  in 
some  states  no  property  can  be  sold  for  cash,  or  the 
legal  tender,  if  two-thirds  of  the  value  is  not  bid. 
This  apprized  value  is  made  from  the  comparison  of 
its  incomes  with  the  income  of  other  values,  and  is 
certainly  a  great  relief  to  the  unfortunate  debtor  that 
promised  a  legal-tender  commodity  which  at  that 
time  was  not  in  the  country;  if  it  had  been  here  it 
would  have  been  the  true  measure  of  the  value  of 

14* 


162  SCIENCE   OF  MONET. 

the  property,  for  values  measure  income,  and  in- 
come measures  values.  It  is  not  this  unfortunate 
class  that  I  have  been  laboring  to  serve,  but  rather 
the  more  numerous  and  not  less  deserving;  class  of 
enterprising  traders  or  adventurers,  whose  all  is 
staked  on  their  good  name  and  punctuality  in 
footing  up  the  ever-recurring  obligations  incident  to 
their  transactions,  that  they  may  not  be  forced 
to  resort  to  the  technicalities  of  the  law  to  free 
them  from  the  promises  of  a  legal  tender  that  could 
not  be  commanded  until  it  had  been  attracted  from 
some  distant  point. 

The  great  object  and  effort  of  the  government  is 
to  induce  the  people  to  produce  commodities  of 
value.  Then  why  not  give  to  them  a  measure  that 
can  at  all  times  be  found  in  the  country?  If  it  is 
not  unchangeable,  it  will  have  the  virtue  of  being 
always  at  hand.  If  the  people  will  play  at  a  game  of 
hazard,  let  them  know  the  percentage  of  loss  against 
them  ;  the  prudent  will  be  enabled  to  calculate  how 
long  they  can  hold  out  against  the  banker  or  dealer 
of  the  game,  and  may  withdraw  in  time  to  save 
themselves  and  their  families  from  irretrievable 
bankruptcy  and  ruin. 

It  is  not  the  production  of  commodities  and  the 
large  amount  of  yield  in  any  one  year  that  bring  on 
the  country  the  monetary  disasters  which  periodi- 
cally exert  such  baneful  influence  ;  it  is  the  want  of 
the  average  yield,  or  the  shortness  in  the  supply,  that 
brings  stagnation  and  retards  for  a  time  the  general 
progress.  Complaints  of  the  scarcity  of  the  medium 
or  legal  tender  may  be  made  when  there  is  or  is 


LEGAL    TENDER,  BALANCE   OF  TRADE,  ETC.     163 

not  an  abundance  of  productions  in  the  country  inci- 
dent to,  and  caused  by,  the  maturity  of  obligations 
based  on  others  and  at  different  times ;  difficulties 
such  as  this  are  but  temporary  in  their  influence  and 
soon  right  themselves.  But  when  these  recovering 
obligations  and  legal  tenders  have  to  be  adjusted 
from  short  productions,  generally  the  entire  indus- 
trial interest  becomes  involved,  and  the  country  is 
left  in  a  prostrate  condition  a  longer  time,  not  only 
with  more  universal  distress  to  the  poor,  but  with 
the  infliction  of  a  permanent  injury  on  all  classes, 
that  can  be  adjusted  only  by  time  and  compromises. 
All  this  internal  commotion  has  but  little  to  do  with 
our  foreign  exchanges  and  the  balance,  so  called,  of 
trade,  against  the  country.  The  government  or 
legislation  of  the  country  cannot  alter  the  balance  ; 
it  can  be  liquidated  only  by  the  parties  and  indi- 
viduals interested.  If,  as  a  country,  we  owe  a  bal- 
ance on  imports  over  production  and  have  lost 
money  in  the  transactions,  those  who  enter  into 
the  speculation  or  give  the  credits  must  bear  the 
loss,  and  adjust  their  differences  as  best  they  may. 
The  internal  exchanges  and  debts  of  a  country 
should  not  be  forced  to  do  more  than  sympathize 
with  them  in  the  distress  of  liquidation.  Our  im- 
porters or  traders  may  be  unfortunate  and  honest, 
and  the  exporters  who  gave  them  credit  beyond  their 
means  maybe  classed  in  the  same  category  of  unfor- 
tunates, and  may  deserve  the  sympathy  of  their 
friends  and  country,  but  let  there  be  no  interven- 
tion, except  in  guarding  their  rights;  further  than 
this  the  government  has  nothing  to  do  with  the 


164  SCIENCE   OF  MONEY. 

balance  of  trade.  After  all,  the  most  reliable  reports 
from  the  exports  and  imports  are  only  apparent,  and 
not  real, — the  real  balance  is  only  a  matter  of  con- 
cern to  individuals,  and  the  adjustment  of  it  is  their 
affair,  not  that  of  the  country.  The  balance  of  trade 
between  one  section  of  our  country  and  some  other 
point  of  the  same  is  of  much  more  importance  than 
any  foreign  balance,  from  the  fact  that  we  give  and 
take  large  credits.  The  balance  due  New  York,  the 
great  clearing-house  of  the  interior,  has  its  influence 
on  millions  in  the  country;  while  that  between  New 
York  and  other  countries  does  not  affect  even  thou- 
sands. It  is  true,  the  first  influence  of  short  produc- 
tion is  felt  at  this  great  center,  but  that  influence 
is  only  paralyzing  to  trade;  with  the  interior  its 
influence  is  much  greater  and  far  more  serious,  re- 
sulting in  the  complete  stagnation  of  reproduction. 
There  are  two  agencies,  one  or  the  other  of  which 
is  all  the  time  influencing  the  market  of  export 
and  import,  calculated  to  destroy  the  even  tenor  of 
trade  and  otherwise  derange  the  financial  affairs 
of  a  country.  The  merchant  may  have  overesti- 
mated the  market  and  imported  too  much,  and 
without  sales  he  will  be  forced  into  extensions  and 
compromises;  or  he  may  have  given  more  credit 
than  production  can  return  in  time;  in  this  case  the 
distress  is  universal,  and  destructive  alike  to  trade 
and  reproduction. 

Between  the  importer  and  exporter,  compromises 
and  equitable  adjustments  can  be  made  and  trade 
go  on  ;  but  not  so  between  the  retail  dealer  and  the 
consumer:  the  "pound  of  flesh"  must  come,  and  if 


LEGAL    TENDER,  BALANCE   OF  TRADE,  ETC.     155 

the  creditor  be  debarred  from  taking  it  at  once,  he 
will  generally  sit  down  for  chickens  to  hatch  or  the 
corn  to  grow.  In  extreme  cases  like  this,  the  only 
sure  relief  to  the  productive  energies  of  the  interior 
is  through  a  universal  flxed  system  of  bankruptcy, 
which  will  allow  industry  and  enterprise  to  work 
out  a  new  fortune ;  the  result  of  which  may  be  a 
surplus  of  capital  for  industry  to  work  upon,  and 
the  country  will  still  live  and  prosper. 

The  circulating  medium  of  a  country  measures 
the  value  or  price  of  all  commodities  in  the  hands 
of  the  debtor  portion  that  desire  a  legal  tender  to 
cancel  maturing  obligations ;  its  influence  on  that 
portion  not  so  circumstanced  arises  only  from  sym- 
pathy and  the  fear  of  lower  money  prices.  The 
result  of  these  influences  is  to  bring  down  values,  in 
comparison  with  the  measure  or  legal  tender,  to  a 
point  below  the  cost  of  production,  until  this  me- 
dium can  be  attracted  from  a  distant  point  or  some 
other  country ;  that  is  to  say,  when  we  offer  our 
productions  below  the  natural  value  or  cost  price 
Ave  can  get  this  legal-tender  money. 

If  the  prosperous  holders  that  have  immediate 
need  of  a  legal  tender  to  cancel  debts  would  ship 
their  goods  or  products  without  drawing  a  bill, 
which,  if  drawn,  would  be  subject  to  the  same  sac- 
rifice as  the  goods,  they  would  avoid  the  loss  inci- 
dent to  a  sale  in  market  where  others  are  competing 
for  a  legal  tender  to  make  good  maturing  obligations. 

From  this  view  of  the  subject,  and  its  connection 
with  the  production  and  legal  tender,  it  will  be  seen 
that  the  latter  measures  only  that  portion  of  the 


IQQ  SCIENCE   OF  MONEY. 

former  which  is  offered  in  exchange,  and  it  is  only 
when  timidity  or  fear  induces  others  to  follow  up 
the  sacrifice  that  the  whole  values  of  the  country 
become  involved  in  the  loss  incident  to  the  deter- 
mination to  exchange  all  products  for  the  legal 
tender.  It  is  at  this  point  light  will  begin  to  break 
in,  from  the  general  disposition  of  the  holders  or 
owners  of  the  medium  to  part  with  it  in  exchange 
for  the  productions  that  are  offered  by  wholesale 
below  cost.  ]STow,  is  it  not  clear  that  if  the  holder  of 
productions  who  is  free  from  debt  and  therefore  is 
not  forced  to  sell,  would  hold  over  his  values,  a 
larger  amount  of  the  medium  could  soon  be  realized 
in  exchange  ?  The  sum  total  of  all  is,  that  our  prin- 
cipal sacrifices  are  mainly  due  to  the  debtor  class. 
It  is  their  effort  to  procure  the  legal  tender  that 
brings  on  all  this  train  of  disasters,  the  ramifications 
of  which  are  so  great,  and  exert  such  a  wonderful 
influence,  at  times,  as  to  deter  many  from  renewing 
their  efforts  to  produce  articles  in  universal  demaud, 
giving  to  the  more  fortunate  few  a  complete  mo- 
nopoly for  years.  This  influence  is  precisely  the 
same  as  that  of  over-production,  which,  for  a  time, 
will  send  down  prices  below  cost.  When  the  price 
for  cotton  ruled  so  low,  in  consequence  of  large 
production  combined  with  immense  indebtedness,  to 
meet  which  forced  sales  had  to  be  made,  thousands 
abandoned  the  culture  and  invested  all  their  capital 
in  the  production  of  sugar,  which  in  a  few  years 
changed  the  relative  prices  to  such  an  extent  as  to 
bankrupt  the  latter  and  enrich  the  former.  When 
this  change  did  come,  those  who  had  embarked  in 


LEGAL    TENDER,  BALANCE   OF  TRADE,  ETC.     \Q1 

sugar  could  uot  go  back  iuto  cotton,  on  account  of 
so  large  an  amount  of  their  capital  being  in  sugar- 
houses,  fixtures,  etc.  Now,  all  these  purgatives  are 
very  well,  and  answer  a  useful  purpose ;  but  it  is 
not  necessary  to  throw  the  patient  into  fits  in  order 
to  rid  him  of  a  fever.  Supply  and  demand  will 
regulate  themselves  in  the  natural  way,  without 
complications  with  the  struggles  of  individual  debt- 
ors for  legal  tender. 

I  am  well  aware  that  much  can  be  said  on  all  sides 
of  this  question.  At  present,  however,  I  deem  it 
best  to  make  but  few  digressions,  as  they  would 
complicate  a  subject  that  is  sufficiently  difficult  to 
pursue  when  holding  on  to  the  main  thread.  No 
subject  has  a  greater  influence  on  the  complications 
of  political  economy  than  this  of  debt.  From  it 
spring  most  of  the  intricacies  of  the  law;  human 
passions  are  fanned  into  flame,  whilst  one  party 
is  trying  to  collect,  and  the  other  is  endeavoring  to 
pay ;  governments  are  made  and  unmade  by  its 
creation  or  extinguishment.  Hence  I  am  compelled 
to  ask  the  reader  to  be  patient  and  bear  with  me  to 
the  end. 

A  paper  currency  not  legal  tender  may  be  com- 
pared to  a  windmill,  whose  sails  are  spread  to 
every  breeze,  with  no  governing  power,  and  are 
swept  away  by  the  first  gale ;  but  if  the  currency 
be  made  legal  tender  and  limited  to  the  require- 
ments of  trade  it  becomes  not  unlike  the  steam- 
engine,  with  its  governor  ready  to  open  or  close  the 
valves  and  accommodate  the  engine  to  the  re- 
sistance offered.     This  allows  human   industry  to 


168  SCIENCE   OF  MONEY. 

feed  up  human  productions  under  a  well-regulated 
system  of  economy  in  steam.  In  order  that  the 
boiler  may  not  he  blown  up,  the  same  governing 
power  can  be  made  to  close  down  the  dampers,  and 
avoid  all  waste  of  fuel,  when  there  is  little  or  no 
work  to  be  done;  in  a  word,  making  the -government 
the  great  fly-wheel  to  collect  and  husband  the 
power  in  order  to  overcome  the  greater  resistance. 

It  is  a  fraud  on  industry,  and  a  robbery  of  produc- 
tion, to  authorize  a  circulating  medium  in  a  country 
that  is  not  at  the  time,  and  will  not  be  for  all  time  to 
come,  a  legal  tender.  If  by  common  consent  it  has 
been  exchanged  for  values,  the  producer  of  those 
values  should  not  be  deprived  of  the  power  to 
cancel  his  maturing  obligations  with  it;  for  how  can 
he  pay  when  he  has  parted  with  the  very  production 
he  was  expected  to  create  when  he  incurred  the  lia- 
bilities ?  When  this  circulating  medium  was  loaned 
to  him,  with  the  view  to  aid  him  in  production, 
the  lender  knew  to  what  extent  it  would  purchase 
commodities  from  which  reproduction  was*  antici- 
pated;  and  if  the  recipient  of  the  loan  parts  with 
this  new  produce  for  the  same  medium,  there  can 
be  no  injustice  in  his  tendering  it  back,  together 
with  the  stipulated  rate  of  interest,  to  the  original 
lender.  The  lender  of  the  medium  will  then  be 
in  the  position  in  which  he  originally  was,  to 
either  lend  it  out  or  invest  it  in  commodities.  He 
may  be  able  to  command  more  or  less  of  produc- 
tions than  when  he  first  had  possession  of  this 
medium.  This  is  a  risk  incident  to  all  exchanges. 
The  producer  who  borrowed  the  medium  had  the 


LEGAL    TENDER,  BALANCE   OF  TRADE,  ETC.     169 

same  perils  to  encounter  when  he  sought  a  market, 
in  order  to  obtain  the  means  of  repayment.  It  is 
nothing  more  than  justice  to  let  the  profit  or  loss 
fall  on  each  adventurer.  ISTo  man  should  be  expected 
or  required  to  insure  the  values  of  others  without 
an  adequate  premium.  If  men  will  not  insure,  they 
must  foot  up  their  own  losses.  Commodities  meas- 
ure commodities.  The  value  of  the  circulating  me- 
dium is  fixed  by  the  amount  it  will  command  of 
them,  and  the  same  process  must  be  gone  through 
to  arrive  at  the  intrinsic  value  of  the  legal  tender. 
This  being  the  case,  is  it  not  unnatural  to  separate 
the  two  and  force  the  seller  of  productions  into 
bankruptcy  for  want  of  a  legal  tender,  when  he  has 
just  parted  with  his  only  asset  for  a  circulating  me- 
dium that  became  worthless  in  the  use? 

The  rapid  increase  of  production  and  consump- 
tion, and  the  consequent  expanse  of  commerce, 
with  its  thousands  of  miles  of  railroad  and  tele- 
graph, demand  greater  elasticity  in  the  circula- 
ting medium,  virtually  ignoring  the  old  cumbrous 
road-wagon,  gold,  except  as  a  remote  measure  of 
value.  Whilst  all  these  changes  are  being  made, 
and  an  elasticity  is  being  given  to  the  circulating 
medium  in  the  exchange  of  commodities,  let  us  not 
force  upon  the  productive  industry  of  the  country 
a  speculative  medium  that  cannot,  at  the  moment 
of  need,  be  converted  into  a  legal  tender.  Do  not 
let  labor  be  duped  an}T  longer  with  the  specious 
promises  of  credit,  which  in  the  past  have  proved 
worthless  in  the  hour  of  greatest  want,  and  which 
will  always  prove  so  in  future.  If  you  give  to  produc- 

15 


170  SCIENCE   OF  MONEY. 

tion  a  medium  of  exchange,  let  it  be  value  received 
and  a  liquidator  of  debt.     If  we  are  to  run  light- 
ning express,  let  us  be  sure  the  company  is  able  and 
willing  to  foot  up  all  losses.     Should  there  be  any 
unwilling  to  enter  into  the  general  disposition  to 
receive  as  a  legal  tender  the  circulating  medium  of 
the  country,  they  can  readily  find  borrowers  who 
will  stipulate  to  return  the  same  commodity  lent; 
should  it  be  gold,  the  holder  of  provisions  can  call 
it  into  being  as  readily  as  any  other  value.     Both 
may   fluctuate   when    compared  with    each   other; 
one  cannot  be  dispensed  with,  the  other  can.     The 
capitalist  or  lender  has  the  right  to  stipulate  for  a 
return  that  will  satisfy  his  wants ;  but  the  govern- 
ment has  no  right  to  permit  the  infliction  of  a  gen- 
eral circulating  medium  on   a  country,  to  be   ex- 
changed for  its  productions,  and  not  to  be  used  at 
the  same  time  to  liquidate  debt. 

A  circulating  medium  that  is  also  a  legal  tender 
can  never  suddenly  become  worthless,  or  of  much 
less  value  than  when  it  was  originally  put  into  circu- 
lation, provided  limitation  has  been  such  that  the 
amount  cannot  be  increased.  Until  the  last  dollar  be 
liquidated,  it  will  still  carry  a  value,  and  property  will 
be  exchanged  for  it  even  should  production  fail  to  give 
a  surplus;  universal  and  unmitigated  distress  cannot 
follow  over-trading  and  wild  speculation.  Should 
production  fail,  wholly  or  partially,  property  or  fixed 
capital  will  only  have  to  retrace  its  steps  and  find 
its  original  owners.  Liquidation  will  go  on,  and  the 
result  will  be  only  partial  bankruptcy,  with  capital 
and  labor  free  to  rebuild  broken  fortune. 


BALANCE   OF  EXCHANGE.  yj\ 


"FAVORABLE  OR  UNFAVORABLE  BALANCE  OP   EX- 
OHANGE"-¥HAT  IT  MEANS. 

In  a  previous  article  I  endeavored  to  explain  the 
nature  and  effect  of  the  "balance  of  trade,"  showing 
that  it  was  not  a  national  affair,  but  an  individual 
balance  of  debt,  to  be  liquidated  by  the  individual. 
I  now  propose  to  pursue  the  same  subject  in  connec- 
tion with  the  balance  of  exchange  for  and  against  a 
country,  in  order  that  much  of  the  mystery  attached 
to  it  may  be  cleared  away. 

If  a  dealer  or  banker  in  New  York  can  o-et  for 
his  draft  on  London  an  amount  of  gold  coin  more 
than  sufficient  to  pay  the  freight,  insurance,  and 
transit,  the  market  is  quoted  at  a  premium,  and 
the  exchange  is  said  to  be  against  us,  or  unfav  or- 
able ;  in  other  words,  if  four  dollars  and  eight}7- 
six  cents  in  New  York  will  not  purchase  a  bill  on 
London  for  one  pound  sterling,  or  one  sovereign, 
then  exchange  is  against  New  York.  Now,  what 
does  all  this  signify  ?  Simply  that  there  is  in  London 
more  gold  than  in  New  York,  or  that  gold  is  worth 
more  in  New  York  than  in  London ;  the  indi- 
cation is  not  at  all  times,  as  is  generally  believed, 
that  of  an  excess  of  importations  over  exports,  or 
merchandise,  or  produce.  In  order  that  the  reader 
may  follow  me  in  the  further  investigation  of  this 
most  intricate  subject,  he  must  realize  the  fact  that 
there  are  two  influences  constantly  at  work,  and  two 
distinct  trades  all  the  time  going  on ;  which,  how- 
ever, run  into  each  other  occasionally,  just  as  the  cir- 


172  SCIENCE   OF  MONET. 

dilating  medium  and  legal  tender  become  mixed  up 
at  times, — a  sharp  demand  for  the  one  operating 
disadvantageous^  on  the  party  desiring  the  use  of 
the  other. 

We  have  dealers  in  every  conceivable  commodity 
as  well  as  in  gold :  the  former  are  constantly  calling 
for  a  medium  of  exchange  ;  the  latter,  for  a  liquida- 
tive  or  legal  tender.  The  office  of  the  dealer  in  gold 
and  exchange  is  double :  he  undertakes  to  furnish 
the  dealer  in.  produce  with  the  purchasing  power, 
and  the  indebted  with  a  legal  tender  or  liquidative ; 
in  each  case,  of  course,  with  a  view  to  profit. 

As  there  is  a  clear  line  of  separation  between  the 
dealer  in  produce  and  merchandise,  and  the  dealer 
in  gold  circulating  medium  and  legal  tender,  we 
must  not  confound  the  operations  of  the  one  with 
the  other.  With  this  digression  we  will  come  back 
to  the  bill  in  New  York  or  London,  worth  a  pre- 
mium, and  said  to  be  unfavorable  and  indicative 
of  something,  generally  understood  to  be  debt,  or 
an  excess  of  imports  over  exports.  Now,  I  con- 
tend that  it  is  more  frequently  an  evidence  of  large 
production  and  a  desire  to  export  than  of  poverty 
or  debt.  A  large  amount  of  commodities  pressing 
on  the  market  of  New  York  for  export  to  London, 
in  the  shape  of  bills  of  exchange,  ofl'ering  to  all 
the  banks  and  dealers  for  a  medium  of  interior  ex- 
change, they  must,  of  necessity,  be  short  of  it  at 
times,  especially  if  there  are  not  as  many  buyers  of 
their  bills  drawn  against  the  proceeds  of  this  ex- 
change. This  shortness  of  the  medium  maybe,  and 
generally  is,  such  as  to  cause  them  to  import  gold 


BALANCE  OF  EXCHANGE.  173 

or  the  legal  tender,  which  tends  to  force  down  the 
price  of  produce  through  the  discount  on  the  ex- 
change, until  the  equilibrium  has  been  restored.  It 
is  simply  an  excess  of  commodities  over  gold,  and, 
so  far  from  being  indicative  either  of  debt  or  pov- 
erty, evinces  great  prosperity  and  a  large  yield  of 
productions,  pressing  for  export  in  advance  of  im- 
ports. This  is  one  view  of  the  subject.  A  desire  to 
import  in  advance  of  available  commodities  indi- 
cates precisely  the  reverse,  and,  in  the  case  of  a 
deficient  harvest,  causes  the  excessive  exportation 
of  gold,  or  of  the  legal  tender  of  the  country  whose 
productions  are  desired,  leading  those  who  are  in 
debt,  as  well  as  those  who  desire  to  speculate,  to 
hold  on  to  as  much  legal  tender  as  they  can  com- 
mand, knowing  that  it  will  soon  be  the  most  valu- 
able commodity  in  the  country,  from  the  fact  that  it 
is  in  demand  for  export.  The  long  and  short  of 
all  this  is,  the  party  desiring  food,  or  something  he 
fancied  he  might  stand  in  need  of,  paid  for  it  with 
gold,  leaving  the  debtor  portion  of  the  community 
without  the  means  of  liquidation,  rendering  neces- 
sary on  their  part,  it  may  be,  even  greater  sacrifices 
in  the  exchange  of  their  products  or  assets  for  it, 
than  were  made  by  the  party  in  want  of  food.  In 
the  one  case  the  deprivation  is  of  a  luxury — a  cir- 
culating medium ;  in  the  other,  of  a  necessity — a 
legal  tender. 

The  foregoing  will  serve  to  pave  the  way  to  a 
proper  appreciation  of  the  concluding  portion  of 
this  subject,  more  particularly  in  its  bearing  on  the 
general  commerce  of  the  country,  and  on  parties 

15* 


174  SCIENCE   OF  MONEY. 

interested  in  this  demand  for  legal  tender  or  gold. 
We  have  seen  that  a  medium  for  the  exchange  of 
products  is  a  luxury,  and  that  a  liquidator  of  deht 
is  a  necessity :  one  party  is  the  speculator  or  cred- 
itor, the  other  the  producer.  "Which  of  the  two 
deserves  encouragement  or  sympathy?  To  illus- 
trate, allow  me  to  cite  the  case  of  the  Bank  of  Eng- 
land, with  her  millions  borrowed  from  the  country. 
It  is  true  she  has  lent  to  her  merchants  and  traders 
largely — but  not  greatly  in  excess  of  what  they  have 
lent  to  her  in  the  shape  of  deposits.  Her  circu- 
lating notes  have  been  given  to  the  country  in  ex- 
change for  its  products,  and  it  is  to  be  presumed 
that  a  valuable  consideration  was  given  at  all  times. 
The  produce  was  lent  and  the  notes  were  borrowed. 
Let  us  now  suppose  that  a  deficient  harvest  makes 
it  necessary  for  the  producer  to  call  on  the  bank  for 
gold,  so  as  to  have  a  legal  tender,  with  which  to 
command  food  from  those  who  are  at  the  moment 
supplied  with  all  other  commodities.  The  moment 
this  demand  springs  up  there  is  great  commotion 
in  the  debtor  class,  including  the  bank,  she  too  being 
called  on  for  a  legal  tender  in  exchange  for  her 
notes ;  the  rate  of  interest  is  advanced,  the  export 
of  gold  is  discouraged,  and  the  cry  of  "  exchange 
is  unfavorable"  is  raised — all  of  which  means  that 
she  is  being  called  on  to  pay  her  debts.  Suppose  she 
does  pay  them,  as  any  honest  merchant  would  do, 
will  the  country  be  any  worse  off,  or  have  fewer 
commodities  to  sell  or  exchange  for  gold?  lean 
see  no  reason  whatever  for  special  legislation  to  give 
her  authority  not  to  pay  her  debts.     If  capital  or 


BALANCE  OF  EXCHANGE.  175 

credit  be  allowed  to  sink  the  producer,  both  will 
find  a  watery  grave ;  the  former  must  bridge  over 
the  stream,  in  order  that  productions  may  safely 
arrive  at  a  market.  If  the  bank  is  allowed  to  issue 
a  medium  of  exchange  for  the  legal  tender,  or,  in 
other  words,  to  borrow  it,  she  should  pay  her  debt, 
wheu  it  is  demanded,  with  a  good  grace ;  if  unable 
to  redeem  it  in  full,  she  should  do  as  thousands  of 
individuals  have  been  compelled  to  do, — give  up 
her  assets  in  liquidation,  and  not  try,  by  a  parade  of 
the  eternal  "balance  of  exchange,"  to  induce  others 
to  think  her  debt  is  any  more  than  that  of  an  indi- 
vidual. After  having  given  up  all  her  legal  tender 
and  property,  still  having  notes  in  existence,  it  may 
be  an  inconvenience  to  the  country  to  lose  the 
amount,  but  she  will  still  have  all  the  values  and 
products  she  had  before. 

The  moral  is,  no  notes  should  be  allowed  as  a  cir- 
culating medium  that  are  not  a  legal  tender.  The 
loss  will  then  be  equitably  divided  among  those  who 
have  them  to  pay  and  those  who  receive  them.  One 
fruitful  source  of  loss  and  ruin  will  be  removed. 
Speculators  may  inflate  prices,  and  finally  fail  from 
a  want  of  ability  to  make  good  the  deficiencies  be- 
tween the  buying  and  the  selling  price ;  it  will  be 
for  them  to  fight  it  out.  The  producer  will  have 
something  left  in  exchange  for  his  assets  by  which 
he  can  cancel  debt.  The  law  calls  for  a  valuable 
consideration  to  make  a  binding  contract.  Give  it 
to  production,  and  you  will  have  conferred  on  it  a 
priceless  boon.  The  incubus  of  doubt  and  uncer- 
tainty will  be  lifted  from  industry,  and  honest  labor 


176  SCIENCE   OF  MONEY. 

will  be  defended  from  fraud  and  the  allurements  of 
the  gambling  speculations  of  those  who  endeavor 
to  live  by  their  wits  alone.  The  storm  may  howl 
without  and  fill  every  harbor  with  the  wrecks  of 
commerce,  but  the  interests  of  production  are  se- 
cure :  they  are  under  their  country's  protection,  and 
in  this  hour  of  need  can  lend  a  helping  hand  to  man 
the  "life-boat,"  in  order  to  succor  perishing  friends. 


LEGAL-TENDER  CIRCULATING  NOTES  NOT  MADE 
LEGAL  TENDER,  A  CURSE  TO  PRODUCTION. 

A  thorough  investigation  of  the  entire  subject  in 
relation  to  its  bearings  on  commerce  and  indi- 
vidual interests  involved — the  necessity  of  a  circu- 
lating medium  to  effect  the  exchanges  of  the  country 
— forces  me  to  a  conclusion  considerably  at  variance 
with  the  majority  of  those  most  deeply  interested  in 
its  details,  especially  in  regard  to  the  benefits  claimed 
to  arise  from  a  circulating  medium  and  legal  tender. 
All  will  admit  the  impossibility  of  effecting  the  ex- 
changes of  a  country  without  a  circulating  medium. 
It  is  my  purpose  now  to  show  who  should  be  the  re- 
cipient of  the  profits  or  tax  on  production.  I  take 
it  for  granted  that  no  one  will  differ  with  me  as  to 
the  distribution  of  the  gain  from  the  use  of  the  me- 
dium, or  as  to  who  should  bear  the  loss  incident  to 
the  maintenance  of  a  circulating  medium,  when  I 
show  the  value  of  the  services  rendered  to  com- 
merce and  the  real  benefit  conferred  upou  trade. 


NON-LEGAL    TENDER   A    CURSE,  ETC.  177 

At  the  outset  I  take  the  position  that  a  circu- 
lating medium  for  the  exchange  of  productions  is 
a  curse  to  a  country  if  that  country  does  not  make 
it  a  legal  tender;  it  inflicts  on  its  industry  all  the 
losses  incident  to  its  use,  leaving  the  interior  trade 
of  the  country,  in  times  of  doubt  and  peril,  without 
compass  or  rudder,  to  say  nothing  of  the  wild  ven- 
tures placed  on  unseaworthy  crafts  fitted  out  by 
reckless  speculators.  To  shield  the  unsuspecting 
from  losses  in  no  wise  connected  with  their  business 
or  interest,  I  now  labor  to  draw  the  line  between 
capital  and  credit :  the  one  is  sure  to  build  up  a 
country ;  the  other  may  dissipate  its  wealth  by  im- 
prudent risks. 

I  am  in  favor  of  all  due  encouragement  to  both, 
but  desire  to  see  them  in  the  hands  of  industry  and 
prudence  :  hence  my  opposition  to  banks  of  circula- 
tion, which  issue  notes  that  cannot  be  made  legal 
tender  at  the  moment  of  necessity,  when  they  have 
absorbed  the  productions  of  industry.  The  most 
serious  objection  to  this  position,  and,  in  fact,  the 
only  one  of  any  importance,  is,  how  can  we  produce 
discounts  and  loans  to  prosecute  works  of  enterprise 
in  the  absence  of  capital? 

Allow  me  to  answer  by  asking  a  few  questions : 
When  you  borrow  the  notes  of  a  bank,  the  best  that 
can  be  devised, — say  the  Bank  of  England, — what 
do  you  get  for  your  notes  and  the  promised  rate  of 
interest  for  time?  Notes  payable  on  demand,  or 
convertible  into  the  gold  or  products  of  the  country; 
otherwise  they  would  be  worthless  to  you. 

After  you  have  the  notes  they  are  not  capital,  nor 


178  SCIENCE   OF  MONEY. 

the  means  of  reproduction  ;  nor  are  they  thejbod  of 
industry  or  labor.  After  you  have  converted  them 
into  commodities  to  aid  production,  you  have  added 
nothing  to  what  was  already  in  existence  in  the  coun- 
try. In  this  case  you  have  borrowed  no  capital,  but 
a  credit.  If  you  attempt  to  draw  gold  to  export  in 
exchange  for  something  to  aid  industry,  the  loan 
will  be  refused,  or  usurious  rates  of  interest  will  be 
demanded. 

This  is  virtually  a  prohibition  to  production.  You 
are  generally  forced  to  retire  these  credits  when 
the  bank  iinds  she  is  not  being  credited  as  usual. 
After  all,  you  have  only  borrowed  a  credit  or  pur- 
chasing power  for  the  time  being,  for  which  you 
have  paid  interest,  and,  whatever  depreciation  may 
occur,  the  individual  holders  must  lose,  as  it  is  not 
a  legal  tender.  If  this  is  all,  why  may  not  the  gov- 
ernment furnish  this  circulating  medium  to  the 
country,  saving  it  the  tax  for  interest,  and  let  its 
people  know  when  they  part  with  their  productions 
that  they  have  instituted  a  legal  tender  with  which 
they  can,  without  further  sacrifice  or  loss,  discharge 
their  debts?  When  you  wipe  out  all  circulating  notes 
from  the  medium  of  exchange,  other  than  the  legal 
tenders  of  the  government,  you  have  left  in  the 
country  the  same  materials  to  support  labor  as  you 
would  have  if  there  were  a  bank  at  every  cross-road. 
Let  us  have  banks,  but  let  them  be  bank?  of  dis- 
count for  collecting  together  the  scattered  and  idle 
capital  of  the  country,  and  lending  it  to  its  people. 

Prudence  will  characterize  their  loan  of  capital ; 
while  ruin  and  inflation  will  grow  out  of  the  loan 


NON-LEGAL    TENDER   A    CURSE,  ETC.  179 

of  credit,  or  circulating  notes, — which  is  the  same 
thing,  in  a  more  objectionable  form,  as  the  losses  fall 
most  heavily  on  the  poor  in  times  of  disaster  and 
trouble. 

If  the  means  of  putting  labor  in  motion  be  still 
in  the  country,  it  will  be  husbanded  and  concen- 
trated in  these  banks  of  discount  when  exchanged 
for  legal  tenders.  Then  the  greatest  amount  of  loans 
can  be  made  that  prudence  and  reproduction  will 
require,  all  of  which  will  be  based  on  real  capital ; 
otherwise,  the  loan  of  credit  may  engulf  both  lender 
and  borrower. 

I  do  not  claim  the  same  benefit  to  production  from 
an  extended  system  of  credits  that  many  do, — real 
value.  Such  commodities  as  are  the  loss  and  return 
of  the  producer  receive  no  more  credit  than  usage 
has  fixed, — to  wit,  a  sixty  days'  sight  bill,  which  fol- 
lows the  produce,  no  loser  intervening,  and  foots 
itself  up  independent  of  a  legal  tender,  as  its  con- 
version, after  all,  is  into  other  commodities. 

The  credits  are  sought  and  obtained  to  bring  the 
goods  and  wares  of  the  merchant  and  trader  to  the 
door  of  the  consumer. 

The  temptation,  in  nine  cases  out  of  ten,  for  the 
sake  of  gain  on  the  one  part,  and  from  the  desire  to 
consume  on  the  other,  is  such  that  the  flattering  but 
delusive  prospects  of  the  future  will  bring  distress 
and  ruin  to  both. 

There  is  no  country  possessing  the  necessaries 
and  conveniences  of  reproduction  that  will  not 
lend  them  to  its  industrious  and  economical  people. 
Prosperous  production  rarely  fails  to  find  capital 


130  SCIENCE   OF  MONEY. 

and  friends.  It  may  be  said  that  prosperous  pro- 
duction sustains  and  gives  all  credit  that  has  a 
favorable  end.  Then  why  force  it  on  the  unsus- 
pecting consumer,  when  it  may  bring  ruin  to  him- 
self and  his  principal? 

Credit  will  inflate,  but  capital  will  build  up  and 
bridge  over  its  mistakes,  if  in  the  hands  of  industry, 
economy,  and  enterprise. 

Banks  of  circulation  lend  credit,  but  often  borrow 
capital  to  a  much  larger  extent,  and  rarely  use  it  in 
a  lasting  or  profitable  manner, — in  reproduction  in 
the  country.  How  can  the  dealers  in  credit  know 
the  food  of  production  ?  Inflation  and  chance  are 
the  only  words  in  their  vocabulary.  Their  allure- 
ments may  have  enabled  speculation  to  send  to  the 
remotest  ends  of  commerce  the  only  true  liquidator 
of  debt  in  exchange  for  their  worthless  promises. 
This  may  have  been  gold  or  mess-pork,  it  matters 
not  which  to  the  producer.  The  legal  tender  has 
been  lost  to  him,  and  he  is  now  required  to  sacri- 
fice his  reserve,  in  order  honorably  to  discharge  an 
obligation.  A  failure  to  do  this  may  completely 
stagnate  future  energy,  so  as  to  complicate  fraternal 
feeling  with  vulgar  lucre,  or  to  allow  dissipation 
and  indolence  to  usurp  the  place  of  honest  toil. 


DEBT,  INTEREST,  AND   LEGAL    TENDER.        181 


DEBT,  INTEEEST,  AND  LEGAL  TENDEE. 

In  summing  up  all  the  arguments  in  defense  of 
the  position  I  have  taken  for  the  divorcement  of 
the  legal  tender  of  the  country  from  go]d  or  any 
other  article  of  merchandise,  and,  finally,  through 
the  saving  to  the  country  of  the  annual  interest  or 
profits  from  a  capital  so  large  as  its  circulating  me- 
dium, by  the  substitution  of  legal  tender  based  on 
the  public  debt,  I  come  to  the  consideration  of  the 
influence  of  those  who  may  happen  to  own  or  be  the 
recipients  of  the  annual  interest  on  this  debt.  And, 
as  the  position  I  am  about  to  take  is  somewhat  at 
variance  with  that  of  the  majority  of  those  who  pro- 
fess to  have  opinions  on  political  economy,  and  of 
those  who  take  their  thoughts  at  second-hand,  it  is 
necessary  for  me  to  go  back  to  the  foundation  of 
the  debt  and  the  causes  of  its  creation,  in  order  that 
the  whole  subject  may  come  up  in  review  for  con- 
sideration on  its  merits. 

However  men  may  differ  as  to  the  policy  which 
led  to  the  creation  of  our  indebtedness,  none  can 
deny  that  it  is  an  established  fact,  amounting  to  at 
least  $2,500,000,000,  and  that  it  is  our  duty  as  a  na- 
tion to  see  that  it  be  honorably  paid.  An  ordinary 
debt,  contracted  to  meet  a  deficiency  of  annual  re- 
ceipts, calls  for  an  effort  on  the  part  of  the  govern- 
ment to  pay  it  promptly ;  but  where  the  sum  has 
been  lent  for  the  purpose  of  maintaining  the  na- 
tional existence,  patriotism — the  highest  incentive  to 

16 


182  SCTENCE  OF  MONEY. 

moral  action — compels  us  to  renewed  exertion,  in 
order  that  final  restitution  may  be  made  and  no  loss 
accrue  to  those  who  came  forward  to  our  relief  in 
time  of  doubt  and  peril. 

It  being  admitted  that  we  owe  the  money,  it 
must  likewise  be  admitted  that  we  cannot  at  present 
pay  it,  but  must  give  a  consideration  to  those  who 
will  lend  us  the  means  to  discharge  the  same ;  and 
here  begins  my  divergence  from  the  usually  received 
ideas  as  to  whom  it  should  be  owing  to,  or  who 
should  be  the  recipients  of  the  annual  interest. 

The  capital  of  this  debt  has  been  sunk  forever, 
so  far  as  this  government  is  concerned;  and  other 
capital  must  be  called  into  being  from  which  the 
principal  and  annual  interest  are  to  be  paid,  pro- 
vided we  are  not  able  to  advance  it.  If  we  were 
able  to  do  without  this  large  sum  in  production, 
there  could  be  no  further  argument  as  to  the  course 
proper  to  be  pursued;  honor  and  prudence  would 
say,  Pay  the  debt  at  once ;  but,  as  we  are  not  able 
to  do  so,  we  must  endeavor  to  find  who  will  let  us 
have  the  means  of  liquidation  for  the  smallest  rate 
of  interest  or  annuity. 

The  security  for  repayment  which  the  govern- 
ment can  offer  to  its  creditors,  it  must  be  conceded, 
will  enable  it  to  negotiate  its  loans  at  much  lower 
rates  of  interest  than  would  be  granted  to  private 
individuals.  It  is  true  there  are  a  few  capitalists  in 
the  country  who  could  negotiate  a  loan  on  as  favor- 
able terms  as  the  government.  They  will  be  the  first 
to  come  forward  and  invest  their  savings  at  the  mar- 
ket  rate  of  such  credits.    Now,  the  question  narrows 


DEBT,  INTEREST,  AND  LEGAL   TENDER.       183 

itself  down  to  this:  If  the  abstraction  of  so  large  a 
sum  from  the  enterprise  of  the  country  should  have 
an  unfavorable  or  destructive  effect  on  its  produc- 
tive power,  and  if  we  can  realize  a  larger  profit  from 
the  use  of  this  sum  in  the  development  of  resources, 
and  finally  lessen  the  burden  in  the  liquidation  of 
our  own  debt  by  the  creation  of  other  and  larger 
means  to  abstract  it  from,  it  certainly  will  be  to  our 
interest  to  insist  on  the  government's  borrowing; 
if  she  can  command  capital  at  four  per  cent,  per 
annum,  it  is  better  than  for  individuals  to  take  the 
same  from  production  and  have  to  borrow  at  eight 
per  cent,  to  fill  the  vacuum.  Hence  it  is  to  our  in- 
terest to  negotiate  with  those  who  offer  the  best 
terms.  In  this  we  must  know  no  country,  but  look 
only  to  the  rate  per  annum,  and  adopt  the  lowest. 
If  this  loan  should  be  offered  by  our  own  people,  it 
will  be  evidence  of  past  economy,  and  will  redound 
to  the  credit  of  our  country.  If  other  countries 
offer  better  terms  than  our  own  citizens  can  afford 
to  take  the  loan  at,  it  will  be  evidence  that  they  too 
have  been  economical,  but  are  without  channels  of 
income  still  open  to  us,  and  yielding  larger  profits; 
hence  the  inducement  they  will  have  to  invest  in  our 
securities ;  it  is  capital  cheaper  than  any  we  have  to 
offer;  it  is  simply  borrowing  at  four  per  cent,  and 
using  the  capital  at  eight  per  cent.  We  cannot  but 
profit  by  the  difference.  If  I  can  get  the  use  of  one 
hundred  bushels  of  corn  for  a  promised  increase  of 
four,  and  it  should,  when  used  in  production,  yield 
me  one  hundred  and  twenty,  I  will  have  left  sixteen 
to  be  used  in  consumption  or  production ;  while  the 


184  SCIENCE   OF  MONEY. 

lender  gets  four  bushels  for  my  use  of  the  hundred, 
I  will  be  the  gainer  of  sixteen.  It  is  this  very  in- 
fluence that  prompts  us  to  trade  with  any  country. 
Can  we  better  our  condition  ?  There  is  no  differ- 
ence-between profits  in  interest  and  profits  on  pro- 
ductions. The  question  is,  simply,  Will  the  inter- 
course better  my  condition?  It  matters  little  to  me 
who  gets  the  four  bushels  of  corn,  since  I  have  six- 
teen left  for  m.j  own  use.  There  can  be  no  contro- 
versy as  to  the  effect  of  the  public  debt  being  owned 
by  its  citizens,  and  letting  the  interest  abstract 
nothing  from  the  country.  It  is  like  taking  money 
out  of  one  pocket  and  putting  it  into  the  other. 
Now,  I  contend  that  it  is  equally  true  that  it  would 
be  more  profitable  to  take  ten  dollars  out  of  one 
pocket-  and  put  eleven  dollars  in  the  other. 

An  effort  has  been  made  to  induce  Congress  to 
place  on  the  market  a  loan  of  $1,200,000,000  at  an 
interest  of  not  over  four  and  a  half  per  cent,  per 
annum.  This  will  save  to  the  country  thirty-three 
and  one-third  per  cent,  of  the  annual  charge.  If 
the  loan  be  taken  at  four  per  cent.,  the  saving  and 
reduction  will  be  fifty  per  cent.  Now,  would  it  not 
be  the  course  of  wisdom  to  call  in  a  competitor 
who  will,  if  allowed,  take  one-half  the  sum  free  of 
charge,  and  make  the  loan  perpetual,  instead  of  for 
twenty  years,  or,  what  amounts  to  the  same  thing, 
\>dy  off  the  debt  and  rid  the  country  of  its  ever-re- 
curring semi-annual  tax?  This  competitor  is  found 
in  the  citizens  of  the  country,  who,  as  they  have 
both  debt  and  interest  to  pay,  should  certainly  be 
consulted.    They  not  only  offer  to  take  up  now  one- 


DEBT,  IXTEREST,  AND  LEGAL    TENDER.        185 

half  of  this  loan,  or  $000,000,000,  but  will  engage  to 
cancel  in  the  same  way,  annually,  no  less  a  sum 
than  $50,000,000.  They  contend  that  this  formi- 
dable competition,  at  the  time  the  loan  is  being 
negotiated,  will  be  such  an  evidence  of  goodfaith 
that  the  balance  will  be  taken  up  at  lower  rates  of 
interest;  and  that  if  they  maintain  their  promise 
for  a  few  years  in  the  prompt  payment  of  interest 
and  the  annual  reduction  of  the  debt  by  $50,000,000, 
the  rate  will  fall,  in  about  fifteen  years,  to  three 
per  cent.,  especially  by  the  maturity  of  the  ten-forty 
bonds. 

If  the  people  of  a  great  producing  country  like 
this  say  they  are  satisfied  to  exchange  their  annual 
productions  for  a  legal-tender  circulating  medium, 
which  the  government  has  the  power  to  furnish 
them,  what  better  security  can  be  offered  than  such 
values  as  the  world  cannot  dispense  with  ?  Can  a 
country  give  stronger  evidence  of  good  faith  than  a 
permanent  and  continuous  investment  to  so  large 
an  amount?  No  constitution  or  law  can  be  half  so 
binding;  either  may  be  repealed  or  become  suscep- 
tible of  misconstruction,  but  when  a  people  invests 
in  a  security  that  promises  only  an  annual  benefit 
or  convenience,  in  the  language  of  Sj7duey  Smith 
when  speaking  of  Pennsylvania  bonds,  "it  is  a  per- 
manent investment;  there  can  be  no  withdrawal." 
The  effect  on  the  finances  of  the  country  of  giving 
to  the  people  what  they  demand,  to  wit,  a  uniform 
measure  of  value  and  circulating  medium,  one  that 
cannot  consume  productions  by  supporting  idle 
adventurers,  and  which  cannot  be   influenced    by 

16* 


186  SCIENCE   OF  MONET. 

fluctuations  resulting  from  speculation  inside  and 
outside  of  the  "ring," — since  the  same  amount  of 
values  will  be  in  the  country, — cannot  be  other  than 
beneficial.  No  one  can  deny  that  there  will  be  a 
saving  to  the  people  of  six  per  cent,  per  annum  on 
$600,000,000,  or  $36,000,000.  Not  only  so:  the 
amount  is  double,  as  I  can  demonstrate  without  re- 
sorting to  Dr.  Franklin's  "  Penny  Saved."  If  the 
circulating  medium  of  a  country  is  as  necessary  to 
its  commerce  as  to  production,  it  is  worth  precisely 
the  same  rate  of  interest  per  annum  whether  used 
in  the  one  or  the  other.  This  being  the  case, 
$600,000,000  at  six  per  cent,  will  cost  $36,000,000. 
Now,  suppose  that  by  the  use  of  my  own  paper  in  the 
same  channel  I  save  the  payment  of  the  $36,000,000, 
the  total  amount  would  be  $72,000,000.  To  make 
this  a  little  clearer,  let  us  suppose  England  should 
offer  to  lend  the  United  States  $600,000,000  for  the 
sum  of  $36,000,000,  and  then,  to  accommodate  us 
further,  should  lend  us  a  like  sum  of  Bank  of  Eng- 
land notes,  to  be  used  as  a  circulating  medium,  for 
a  like  annuity  of  $36,000,000,  would  she  not  an- 
nually abstract  from  us  $72,000,000?  If  we  could 
do  no  better,  this  would  be  a  very  favorable  offer, 
and  we  should  by  all  means  accept  it,  rather  than 
resort  to  the  most  favored  banking  institution  ever 
established  in  this  country.  None  of  them  ever 
lent  us  their  circulating  notes  long  at  a  time  for 
less  than  double  this  rate  of  interest,  as  is  proved 
by  the  amount  of  their  annual  dividends  over  all 
the  losses  and  expenses'  incident  to  trade.  If  to  this 
$72,000,000  be  added  the  annual  promised  reduc- 


MEDIUM  OF  EXCHANGE.  187 

tion  of  $50,000,000,  and  the  consequent  saving  in 
interest,  and  its  rate  at  compound  interest  for  a  few 
years  be  calculated,  the  vast  benefit  to  production 
resulting  from  the  economy  and  security  of  a  uni- 
form medium  will  become  apparent.  Manufactures 
and  commerce  cannot  languish  long  under  increas- 
ing productions,  but  will  in  their  turn  stimulate 
new  and  grander  efforts. 


MEDIUM  OF  EXCHANGE. 

The  circulating  medium  should  have  no  other 
value  than  as  a  medium.  By  limiting  it  to  the  de- 
mand, it  will  remain  uniform  and  will  have  no  dis- 
turbing influence  on  commodities,  as  is  the  case  if 
it  has  intrinsic  value. 

Exports  buy  and  pay  for  imports,  whether  of 
goods  or  gold.  Imports  banish  gold  from  the 
country. 

When  gold  was  the  leg-al  tender  and  medium  of 
exchange,  the  exports  had  to  purchase  it  at  an  ex- 
pense of  five  per  cent,  per  annum  on  an  average, 
through  the  discount  on  bills  drawn  against  export 
articles  or  produce.  All  this  was  needed  to  keep  up 
the  supply  required  as  a  medium  and  legal  tender  in 
the  interior  of  the  country.  All  shipments  had  to 
pay  this  charge,  when  but  a  small  portion,  if  any, 
was  needed  by  the  producer  as  a  legal  tender. 
Even  the  banks  exacted  this,  in  order  to  be  protected 
against  the  results  of  an  imprudent  issue  of  their 


188  SCIENCE   OF  MONEY. 

notes;  when  the  market  became  panicky,  they 
doubled  the  charges,  so  that  if  the  gold  did  not  re- 
turn in  time  through  the  accustomed  channels,  it 
might  be  forced  through  express  messengers 

Exports  paid  annually  $25,000,000  to  keep  up  the 
supply  of  gold  medium.  This  sum  was  largely  used 
by  importers  as  a  discrimination  against  domestic 
manufactures, — the  cheap  exchange  enabling  them 
to  bring  in  goods  at  a  profit  that  otherwise  could 
not  have  been  imported.  The  exchange  is  as  much 
an  item  in  the  cost  as  freight  or  any  other  charge. 
The  price  reacts  with  the  reaction  in  exchange,  pre- 
cisely as  it  does  now  with  gold.  This  large  sum  is 
a  dead  loss  to  the  producer,  and  is  nothing  more 
thau  a  bounty  to  the  foreign  manufacturer. 

To  keep  up  a  medium  costs  the  country  the  aver- 
age rate  of  interest  for  money  on  both  securities.  If 
we  use  $600,000,000,  the  cost  at  six  per  cent,  is 
$36,000,000.  Who  should  be  the  recipients  of  this 
sum  ?  It  certainly  should  be  the  people  who  adopt 
it  as  a  medium  and  make  it  a  legal  tender. 

Lessening  the  demand  or  increasing  the  supply 
of  commodities  tends  to  cheapen  them  in  price. 
If  we  discard  gold  as  a  medium,  we  lessen  the  de- 
mand to  some  extent,  and  consequently  cheapen  it. 
This  influence  will  be  felt  by  all  countries  holding 
gold.  More  of  it  will  be  given  for  our  exports. 
This  being  one  of  the  laws  of  trade,  the  converse 
holds  good.  With  our  substituted  legal  tenders,  in- 
ternal exchange  will  go  on  with  increased  regularity, 
and  the  export' or  import  of  gold  will  have  no  more 
influence  than  the  sending  oft' of  so  much  cotton  and 


MEDIUM    OF  EXCHANGE.  189 

the  return  of  wines  and  silks.  "We  produce  to  con- 
sume. It  is  the  amount  of  production  that  enables 
us  to  buy  or  sell. 

Government  credit  is  measured  solely  by  the  sur- 
plus of  production  over  consumption.  jS"o  country 
ever  surrendered  its  stock  in  trade  in  payment  of 
debt:  to  do  so  would  be  a  change  of  nationality; 
hence  the  debt  is  a  bond  on  income  over  consump- 
tion. 

Bills  of  exchange,  as  now  used,  are  the  purchasing 
power  and  medium  between  exports  and  imports, 
especially  between  the  raw  produce  of  the  country 
and  a  great  part  of  the  imports.  In  the  absence  of 
undue  fluctuations,  value  commands  the  legal  tender 
on  which  the  bills  are  drawn,  and  their  legal  tender 
commands  the  commodities  we  desire  to  import. 
From  a  mutual  exchange  both  countries  derive  their 
profit  to  the  extent  of  the  gratification  of  these  de- 
sires. The  medium  of  exchange  adds  no  value  to 
the  commodities,  nor  does  it  give  a  country  new 
products.  Its  office  is  to  find  the  surplus  of  one 
party  to  be  used  by  the  other. 

Abundance  depresses  prices,  and  scarcity  elevates 
them.  Values  are  in  the  inverse  ratios.  One  is 
wealth,  the  other  is  poverty ;  one  is  sleek  and  fat, 
the  other  is  lean  and  gaunt. 

On  the  next  page  I  place  a  diagram  to  illustrate 
and  simplify  the  position  I  have  taken  in  regard  to 
the  comparison  of  values  based  upon  a  medium 
having  no  intrinsic  value  bevond  the  commodities 
it  will  exchange  for  or  command.  "With  this  scale 
and  a  price-current  before  you,  the  relative  exchange 


190 


SCIENCE   OF  MONET. 


value  can  easily  be  found.  Suppose  the  scale  to 
represent  the  supply  at  the  prices  affixed  in  accord- 
ance with  a  legitimate  demand,  and  with  the  prin- 


Outfit  for  Labor      .... 

1000 

Thousands. 

100 

Hundreds. 

Outfit  of  Clothing  .... 

50 

40 
30 

1  bbl.  Pork 

20 

Double  Eagle. 

10 

Tens.     Eagle. 

9 

50  lbs.  Coffee 

8 

7 

6 

1  bbl.  Flour 

5 

i  Eagle. 

$100  at  Interest       .... 

4 

3 

2 

100  lbs.  Salt 

1 

Units.     Dollar. 

0 

ciple  of  giving  to  labor  and  capital  the  same  return 
from  the  production  of  the  one  article  as  the  other, 


MEDIUM  OF  EXCHANGE.  191 

in  the  open  market  one  bale  of  cotton  will  exchange 
for— 

An  Outfit  of  Clothing 50 

1  bbl.  Pork 20 

2  "     Flour 10 

100  lbs.  Sugar -10 

50  lbs.  Coffee 8 

1  bbl.  Potatoes 2 

$100 

If  the  medium  can  be  exchanged  for  all  the  above 
commodities,  it  will  buy  the  bale  of  cotton.  Then 
the  grower  of  four  bales  of  cotton  will  be  able  with 
one  to  clothe  and  feed  the  laborer;  with  another  he 
can  pay  rent,  or  ten  per  cent,  on  $1000,  and  with  the 
remainder  he  can  support  and  educate  a  family  of 
five  ;  or,  in  other  words,  the  laborer  that  can  save  up 
this  $1000  can  accomplish  all  this  when  too  infirm 
to  work. 

Endless  combinations  and  compromises  can  be 
made.  If  one  barrel  of  pork  sells  for  $20  in  gold,  then 
five  barrels  of  pork  will  command  one  bond  of  $100, 
or  one  bale  of  cotton,  or  twenty  barrels  of  flour. 
Again,  suppose  a  failure  of  production  in  any  one 
article  of  prime  necessity;  the  decrease  of  the  supply 
will  enhance  the  prices  of  the  scale.  The  owner  of 
the  bale  of  cotton  will  now  be  forced  to  dispense 
with  some  of  the  luxuries,  and  so  on  with  all  pro- 
ducers to  mankind.  This  is  a  positive  loss.  Human 
labor  does  not  receive  or  enjoy  its  accustomed  re- 
ward. 

Now,  take  the  most  favorable  view  of  human  labor 
and  its  returns  from  a  greater  intimacy  with  capital. 


192  SCIENCE   OF  MONEY 

Let  all  products  be  doubled,  wealth  will  be  doubled, 
human  enjoyments  will  be  in  the  same  ratio,  and 
the  relative  value  of  products  will  remain  the  same. 
If  the  volume  of  the  medium  remains  unchanged, 
its  value  will  be  enhanced.     If  it  be  also  doubled, 
relative  prices  will  be  the  same,  interest  remaining 
the  same;  but  if  it  be  not  doubled  in  the  same  pro- 
portion, interest  will  be  doubled,  as  there  will  be 
a  greater  demand  for  capital  in  the  building  up  of 
new  labor  to  gratify  human  wants  and  desires.     As 
you  increase  quantities  you  decrease  prices.     Popu- 
lation remaining  the  same,  you  increase  wealth  or 
the  power  to  enjoy  the  necessaries,  conveniences, 
and  luxuries  of  life.    The  general  lessening  of  prices 
increases  the  abundance  of  enjoyments.     With  in- 
creased production  new    wants    spring   up.      This 
is  the  great  stimulus  to  incessant  production,  and 
from  which   all  communal  prosperity  springs.     If 
these  new  desires  cannot  be  gratified  at  home,  for- 
eign trade  supplies  them  with  the  conveniences  and 
luxuries  of  other  countries.      Here  a  local  legal- 
tender  medium  displays  its  greatest  powers  in  the 
distribution  and  economy  of  the  surplus  fruits  of 
human  labor,  and  demands  no  sacrifice  in  the  hunting 
up  of  a  medium  further  than  a  change  in  the  rates 
of  interest  sufficient  to  induce  the  holder  of  four  per 
cent,  bonds  to  convert  them  into  a  medium  equal  to 
the  increased  products  of  the  country,  thus  giving 
back  to  the  fortunate  laborer  nearly  a  full  return  ot 
other  men's  surplus  in  exchange  for  his  excess. 

The  commodity  whose  supply  is  increased  should 
not  have  its  exchangeable  value  destroyed  by  being 


MEDIUM  OF  EXCHANGE  193 

forced  to  hunt  up  a  legal-tender  medium  that  has 
no  elasticity ;  it  should  only  contribute  to  the  pay- 
ment of  the  enhanced  price  of  the  goods  desired  in 
return,  resulting  from  the  new  or  increased  demand. 
This  in  many  instances  cannot  be  great,  from  the 
fact  that  nearly  all  men  hold  a  surplus  of  some  one 
thing  which  they  would  be  willing  to  exchange  for 
the  increased  production.  This  will  give  an  oppor- 
tunity to  effect  the  exchange  not  before  offered. 
Whatever  the  increase  in  the  value  of  other  com- 
modities, it  will  be  equally  distributed ;  no  one  will 
be  the  loser,  and  the  fortunate  holder  of  the  in- 
creased product  will  have  the  chance  to  enjoy  the 
full  benefit  of  his  good  fortune. 

If  foreign  luxuries  are  desired,  there  must  be  a 
surplus  of  home  products  to  give  in  exchange  for 
them.  If  there  are  cheap  facilities  for  export,  and 
no  unnecessary  restrictions  imposed  by  the  impor- 
tation of  a  legal-tender  medium,  we  may  hope  for 
an  equitable  exchange  of  surplus  commodities ;  it 
is  absolutely  necessary  that  there  be  a  clear  under- 
standing of  the  relative  position  of  products,  one 
to  the  other,  before  any  change  of  policy  can  be 
hoped  for. 

There  may  be  in  Europe  a  glut  of  many  articles 
much  desired  by  the  growers  of  grain  in  America, 
of  which  we  may  have  a  glut.  The  one  will  relieve 
the  other,  and  do  all  that  human  labor  can  accom- 
plish, in  adding  to  the  enjoyments  of  life,  or  con- 
tributing to  reproduction.  Commodities  may  be 
ill  distributed,  but  there  can  be  no  general  glut. 

Industry  under  ordinarily  favorable  circumstances 

It 


194  SCIENCE   OF  MONET. 

will  produce  a  surplus  of  commodities.  It  should 
then  be  the  effort  of  capital  and  commerce  to  cheapen 
charges  and  facilitate  transportation ;  then  a  larger 
amount  of  goods  can  be  brought  back  in  return, 
with  increased  power  to  consumers, — since  the  pro- 
ducer would  rather  pay  ten  per  cent,  on  his  profits 
than  the  regular  commissions  of  two  and  a  half  per 
cent,  on  gross  sales.  The  power  of  the  consumer  to 
purchase  enables  the  merchant  to  sell  and  accumu- 
late. 

A  more  than  average  increase  of  productions  re- 
sulting from  a  favorable  season — there  being  a  le- 
gitimate desire  for  them,  aud  a  surplus  to  buy  them 
with — should  not  lower  the  exchangeable  value  of 
the  increased  products ;  it  may  raise  the  value  of 
those  to  be  exchanged  for  them. 

There  is  a  point  around  which  exchangeable 
values  vibrate.  This  is  found  by  the  worth  of 
capital  and  sum  of  human  labor  in  the  produc- 
tion. A  permanent  deviation  from  this  point  will 
attract  or  repel  the  efforts  to  produce;  and  this  is 
self-regulating,  and  should  not  be  interfered  with 
by  any  artificial  regulations  in  effecting  the  ex- 
changes. To  make  the  position  more  apparent, 
underwriters  make  good  the  losses  of  bad  seasons 
from  the  accumulations  of  the  good ;  to  lower  the 
rate  of  premium  in  prosperity  would  bankrupt  them 
in  adversity.  A  profitable  scale  of  mortality  in  the 
expectancy  and  insurance  of  life  will  not  do  to  use 
in  the  granting  of  annuities. 

There  is  an  oft-repeated  saying  that  half  a  crop 
will  fetch  as  much  money  as  a  whole  one.  This  will 


MEDIUM  OF  EXCHANGE.  195 

be  the  case  where  the  medium  has  no  elasticity  and 
cannot  expand  with  the  production,  compelling  the 
laborer  to  lose  its  enjoyments  in  the  same  ratio, 
depriving  him  of  the  abundance  which  nature  gave 
him  and  intended  he  should  enjoy.  If  a  man  hap- 
pens on  a  streak  of  good  luck,  allow  him  to  treasure 
it  up  to  aid  him  when  the  day  of  misfortune  comes. 
I  am  well  aware  that  the  cost  of  productions  is 
measured  by  labor,  below  which  point  it  cannot 
remain  for  any  length  of  time ;  nor  can  it  rise 
permanently  above  it.  It  is  the  profits  from  the 
accidental  streak  of  good  luck  that  I  wish  to  econo- 
mize for  use  when  a  reverse  shall  come.  If  life  and 
human  exertion  were  one  constant  even  flow  of 
power  to  enjoy  and  consume,  there  would  be  no 
need  of  a  great  fly-wheel  to  accumulate  force,  in 
order  to  overcome  the  terrible  resistance  of  ad- 
versity, which  the  ordinary  momentum  may  not  be 
able  to  accomplish.  Let  us  lay  up  a  reserve  from 
times  of  prosperity,  in  order  that,  when  the  great 
tilt-hammer  has  to  be  raised,  no  perceptible  dimi- 
nution of  motion  can  be  seen  in  the  machinery. 
Let  us  no  longer  run  this  great  machine  of  produc- 
tion and  consumption  without  a  fly-wheel.  Do  not 
force  us  to  compare  all  products  by  one ;  if  so,  you 
will  at  one  time  have  to  conform  to  the  standard  or 
measure.  If  you  make  one  bushel  of  wheat,  it  is 
called  a  bushel;  if  two,  let  it  not  be  called  one;  if 
a  half  bushel,  it  is  only  a  half  bushel.  Let  us  have 
a  rule  that  will  work  both  ways.  If  one  bushel  of 
wheat  be  the  equivalent  of  ten  yards  of  calico,  then 
I  claim  twenty  yards  for  two  bushels,  and  will  not 


196  SCIENCE  OF  MONET. 

complain  at  receiving  five  yards  for  half  a  bushel. 
I  am  willing  that  my  misfortunes  shall  abridge  my 
enjoyments;  but  when  the  good  fortune  comes,  let 
me  have  the  full  benefit  of  it;  do  not  force  me  to 
make  a  voyage  around  the  Horn  when  I  can  make 
the  journey  by  rail  and  save  time  and  expense. 
When  I  offer  my  increased  product,  and  you  have 
nothing  from  the  average  to  exchange  for  my  sur- 
plus, do  not  undervalue  mine  by  comparing  it  with 
gold,  but  allow  me  to  make  the  best  exchange  I 
can,  though  I  may  have  to  go  to  a  foreign  country 
to  effect  it. 

Values  buy  and  exchange  for  values,  whatever  the 
medium  may  be.  If  of  intrinsic  value,  its  original 
cost,  together  with  its  added  value  as  a  legal  tender, 
must  be  estimated ;  if  conventional,  it  will  be  meas- 
ured by  the  commodities  for  which  it  will  exchange, 
leaving  all  commodities  free  to  exchange  for  each 
other.  Then,  if  I  have  pork  and  desire  flour,  I 
will  not  have  to  ask  the  price  of  gold  or  cotton  in 
effecting  an  equitable  exchange.  N"o  extraneous 
elements  will  have  to  be  called  in  to  disturb  the  har- 
mon}'  of  our  values.  If  I  want  gold  at  any  time,  I 
will  measure  my  values  by  the  cost  or  value  of  gold, 
and  will  not  be  forced  to  pay  the  extra  price  conse- 
quent upon  its  having  been  made  by  law  alegal  tender. 
If  I  do  not  like  the  terms  offered  in  exchange,  I  will 
consult  my  next  greatest  need,  which  may  be  a  milch- 
cow.  If  as  plenty  as  pork,  there  will  be  no  difficulty 
in  effecting  an  exchange;  if  not,  the  option  will  be 
left  to  call  on  cotton  to  import  me  the  gold.  This 
is  the  simple  history  and  great  truth,  and  forces  the 


MEDIUM  OF  EXCHANGE.  197 

conclusion  that  the  medium  should  have  no  intrinsic 
value,  and  should  be  at  all  times  a  legal  tender,  like 
our  greenbacks,  and,  to  give  it  elasticity,  should  be 
made  interchangeable  with  four  and  a  half  per  cent, 
bonds :  then  the  rise  or  fall  of  the  medium  will 
conform  to  large  or  small  productions,  freeing  us 
from  the  financial  complications  of  other  countries. 
If  the  producer  part  with  his  goods  for  a  medium 
not  legal  tender,  and  then  be  informed  by  his  cred- 
itor that  the  bank  or  insurer  has  exploded,  how  can 
he  pay  his  debts,  having  parted  with  his  assets  ? 

A  medium  and  leo;al  tender  interchangeable  with 
four  per  cent,  bonds  will  have  the  ultimate  value  of 
a  four  per  cent,  annuity.  When  no  greater  value 
presents  itself  in  exchange,  it  cannot  remain  long 
below  this  point ;  while  it  is  being  exchanged  for 
other  values  and  used  as  a  medium,  the  government 
will  be  benefited  to  the  amount  of  the  interest  saved. 

Secure  to  industry  and  economy  their  honest  dues, 
and  increased  productions  will  be  the  result.  There 
can  be  no  greater  incentive  held  out  to  labor  than 
uninterrupted  possession  in  all  the  transformations 
and  exchanges  of  its  products.  Nothing  tends  sooner 
to  dampen  the  ardor  of  man  than  insecurity ;  his 
disasters  are  not  confined  to  himself, — the  blight- 
ing effects  are  soon  felt  by  trade  and  commerce. 

The  large  demand  on  this  country  for  cotton  by 
England  tends  to  cramp  their  market  for  discounts, 
from  the  fear  that  the  amount  may  not  be  covered 
by  their  exports,  causing  a  heavy  demand  on  the 
banks  for  gold,  or  unfavorable  balance  of  exchange. 
This  is  especially  the  case  when  the  bills  against 

17* 


198  SCIENCE  OF  310 NET. 

this  cotton  begin  to  mature,  causing  speculators 
and  spinners  to  ask  for  large  discounts  to  aid  them 
in  carrying  stock,  resulting  often  in  the  prostra- 
tion of  the  market,  and  reacting  on  the  balance 
of  our  crop  of  cotton  to  go  forward.  Now,  if  we 
had  no  calls  for  gold  as  a  legal-tender  medium,  their 
fears  would  be  dissipated  to  a  considerable  extent, 
and  our  exports  would  be  paid  for,  as  usual,  by  our 
imports  of  their  surplus,  each  party  realizing  a 
steady  market,  and,  at  least,  exemption  from  the 
ruinous  disasters  incident  to  so  large  a  trade, — more 
especially  when  European  complications  tend  to 
war,  forcing  capital  to  the  great  centers  for  protec- 
tion against  any  unfavorable  balance  of  trade. 


EXCHANGE  AND  MEDIUM. 

I  feel  confident  that  no  one  well  acquainted 
with  the  course  of  the  exchange  market  will  con- 
tend that  the  business  of  a  large  crop  of  any  or  all 
exportable  commodities  can  be  effected  so  cheaply, 
and  with  so  little  friction  or  derangement  to  trade 
and  liquidation  of  debt,  as  it  is  now  done  with  our 
inconvertible  legal-tender  medium.  If  you  will  look 
fairly  and  squarely  at  the  object  and  purpose  of  a 
medium  on  productions,  which  is  but  consumption 
and  reproduction,  you  will  find  that  the  effort  of  all 
those  who  have  a  surplus  is  to  exchange  it  for  the 
largest  amount  of  other  people's  goods.  When  this 
is  the  case,  a  greater  impetus  is  given  to  produc- 


EXCHANGE  AND   MEDIUM.  199 

tions;  and  without  being  thus  stimulated,  con- 
sumption cannot  go  on  to  the  extent  that  will  bring 
the  greatest  benefit  to  the  largest  number. 

If  it  be,  as  I  have  stated,  a  positive  benefit  tc 
productions  to  make  use  of  a  local  legal-tender 
medium  in  the  sale  and  exchange  of  man's  sur- 
plus, then  it  is  a  curse  to  inflict  on  them  a  medium 
without  elasticity,  that  cannot  be  used  freely  with- 
out exerting  a  disturbing  influence  in  the  buying 
and  selling  exchange,  the  discount  on  which  must 
be  a  loss  to  the  producer,  as  well  as  to  the  trader, 
who  can  import  with  safety  only  to  the  extent  of 
the  exports,  and  consequently  must  lose  the  profits 
on  the  increased  trade  now  thrown  away. 

These  losses  are  greatest  in  times  of  prosperity, 
when  large  exports  are  pressing  on  the  market, 
and  dealers  in  exchange  are  compelled  to  advance 
the  rate  of  discount  to  cover  the  delay  and  expense 
incident  to  getting  returns  per  express,  or  when  im- 
ports are  coming  in  freely,  requiring  the  exchange 
to  pay  for  them.  Many  large  importers,  whose 
capital  is  larger  than  their  ordinary  business  will 
absorb,  avail  themselves  of  these  favorable  oppor- 
tunities to  co»ver  not  only  their  past  imports,  but  to 
provide  in  advance  for  new  ones,  frequently  realizing 
larger  profits  by  the  discount  than  the  ordinary 
charge  for  importing.  Still,  after  all,  the  losses  fall 
entirely  on  the  producer  of  the  exports. 

I  cannot  adduce  better  proof  of  the  correctness 
of  this  position  than  the  workings  of  our  present 
exchanges  for  the  past  few  years,  under  the  influ- 
ence of  the  legal-tender  act ;  the  variations  at  no 


200  SCIENCE   OF  MONET. 

time  having  exceeded  the  charges  necessary  to 
cover  bills  by  shipment  of  coin.  ISTow  I  contend 
that  a  further  saving  on  this  will  be  effected  so 
soon  as  a  four  per  cent,  bond  can  be  converted  into 
legal-tender  medium,  from  the  fact  that  all  large 
dealers  in  foreign  bills  will  keep  by  them,  as  a 
reserve,  bonds  to  fall  back  on,  in  case  currency 
should  grow  scarce  from  a  large  pressure  of  bills 
on  the  market  against  the  producer  of  the  interior 
for  export.  This  position  of  the  market  is  sure  to 
occur  annually  at  the  South,  on  account  of  her 
large  export  of  cotton,  a  small  amount  of  which 
produces  a  large  sum  of  exchange.  The  discount 
of  one-half  to  one  per  cent,  on  a  bond  bill  will 
tempt  the  holder  of  the  four  per  cent,  bond  to  con- 
vert it  into  the  medium,  in  order  to  realize  this 
extra  interest. 

The  great  incentive  to  deal  in  exchange  is  the 
rapid  movement  in  buying  and  selling  the  capital. 
Being  turned  over  many  times,  even  at  one-eighth 
to  one-quarter  per  cent.,  it  realizes  in  the  aggregate 
a  large  interest  per  annum;  a  running  liability  of 
$10,000,000  will  give  for  the  year  over  $100,000,000 
of  business  and  a  profit  of  over  $100,000  from  a  cap- 
ital of  not  more  than  $500,000,  which  must  be  kept 
well  in  hand,  with  no  dead  weight  or  extra-hazard- 
ous risks.  In  insurance  it  is  the  small  premiums 
for  good  risks  that  pay  best. 

The  above  profits  will  also  inure  to  the  benefit  of 
the  interior  dealer  in  checks  and  bills;  he  too  will 
keep  his  reserve  in  bonds,  in  order  to  command  the 
medium  on  the  spot,  so  as  not  to  be  forced  to  send 


EXCHANGE  AND  MEDIUM.  201 

off  his  bills  for  discount,  to  be  sent  back  in  currency, 
witb  express  charges  and  loss  of  interest. 

Take  the  position  of  the  buyer  of  a  sterling  bill 
against  cotton.  Suppose,  before  the  consignment 
arrives  in  Europe,  a  large  demand  resulting  from 
war  complications  is  made  on  the  Bank  of  England 
for  coin ;  immediately  up  goes  the  rate  of  interest 
and  down  goes  cotton,  as  it  must  be  sold  to  pay  the 
bill.  This  decline  may  be  so  great  that  the  bill  will 
be  dishonored  and  fall  back  on  the  dealer  or  banker. 
It  is  these  sharp  turns  in  the  market  that  bring  on 
the  trade  nearly  all  the  losses,  sweeping  from  the 
stage  both  the  drawer  and  the  buyer  of  the  exchange. 
At  this  point  panics  generally  set  in,  and  react  on 
the  producer,  not  only  lowering  the  price  of  what 
he  may  have  for  sale,  but  involving  him  in  ruin,  if 
the  medium  he  receives  for  his  cotton  proves  not  to 
be  a  legal  tender,  which  is  likely  to  be  the  case  if  it 
be  bank-notes. 

You  may  answer  that  if  the  medium  be  national 
bank-notes  the  government  will  take  care  of  them. 
She  may  at  that  very  time,  however,  be  in  such  a 
position  that  it  will  be  impossible  for  her  to  do  so. 

If  we  divorce  ourselves  from  gold  at  once,  few 
sharp  angles  will  have  to  be  turned.  With  this 
disturbing  element  out  of  the  way,  all  parties  will 
be  better  able  to  calculate  the  chances,  as  they  will 
be  conformed  generally  to  the  estimate  of  stocks 
in  the  different  markets  and  the  probable  demand. 
Statistics  and  price-currents  will  give  very  accu- 
rately this  information  as  to  supply  and  stock. 

In  regard  to  gold,  we  have  been  without  reliable 


202  SCIENCE   OF  MONEY. 

data,  and  must  continue  so,  from  the  fact  that  its 
course  is  so  erratic.  A  speck  of  war,  no  bigger  than 
a  man's  hand,  may  upset  the  best-laid  plaus  of  men 
and  governments.  ISTo  one  can  foresee  when  the 
timid  will  begin  to  hoard  gold,  nor  how  long  they 
will  withhold  it  from  the  channels  of  trade.  It  is 
not  so  with  cotton  or  food.  Hunger  will  force  sales 
of  the  latter,  and  general  as  well  as  individual  in- 
terest will  force  consumption  of  the  former,  in  order 
to  buy  the  food  and  keep  the  millions  from  idleness 
and  want. 


TEUE  BASIS  01  ALL  MEDIUMS. 

Whatever  the  medium  may  be,  it  neither  adds 
to  nor  diminishes  the  quantity  of  commodities  on 
sale.  Then  why  should  it  be  an  exportable  article, 
with  the  power,  when  short  in  supply,  of  disturbing 
the  relative  exchangeable  values  of  all  other  pro- 
ductions? 

The  interior  banking  companies  frequently  run 
short  of  currency  and  lose  the  opportunity  to  take 
all  the  bills  against  produce  seeking  export  points, 
and  are  compelled  to  forward  these  bills  to  the  great 
commercial  centers  for  discount,  and  to  have  cur- 
rency sent  back  to  them  by  express  in  return.  If  the 
conversion  of  four  per  cent,  bonds  into  the  medium 
were  admissible,  a  large  portion  of  this  expense 
would  be  saved  to  the  stockholders  and  immediate 
neighborhood,  causing  them  to  invest  a  large  por- 
tion of  their  capital  in  these  bonds,  in  order  to  be 


TRUE  BASIS   OF  ALL   MEDIUMS.  203 

prepared  to  buy  all  the  bills  against  the  crop, know- 
ing that  the  season's  imports  will  consume  the  ex- 
change, and  realizing  two  profits  instead  of  one. 

The  circuit  of  the  medium  must  be  made.  The 
producer  pays  it  to  the  retail  dealer  for  goods  and 
for  debt,  he  to  the  banker  for  bills  on  the  country 
from  which  he  desires  to  import  goods,  and  the 
banker  passes  it  back  to  the  buyer  of  the  country 
produce  against  his  bill.  Prosperous  productions 
throughout  the  country  call  for  an  increased  sup- 
ply of  the  medium.  When  this  extra  demand  no 
longer  exists,  that  portion  of  the  medium  at  last 
will  seek  a  four  per  cent,  bond,  from  the  fact  that 
it  can  be  sent  for  at  any  moment  to  engage  in 
hunting  up  surplus  commodities  for  sale. 

Civilization  and  the  multiplication  of  commodi- 
ties create  new  desires,  that  cannot  be  gratified 
by  the  productions  of  one  man's  labor ;  hence  the 
necessity  of  exchange  for  the  surplus  of  others,  in 
order  that  the  wants  of  each  may  be  supplied ;  and 
this  necessity  gives  rise  to  the  employment  of  a 
medium. 

If  you  take  into  consideration  the  importance  of 
a  medium,  and  then  weigh  the  use  and  find  out 
the  object,  you  will  be  better  able  to  judge  of  the 
kind  that  is  needed,  and  will  know  the  greatest 
number  of  wants. 

In  the  first  place,  you  are  compelled  to  have  a 
medium  in  order  that  commodities  may  be  ex- 
changed in  the  supply  of  man's  innumerable  wants. 

As  many  supply  these  wants  by  purchases  of  goods 
on  time,  they  can  only  safely  sell  when  they  are  get- 


204  SCIENCE   OF  MONET. 

ting  in  exchange  something  that  will  liquidate  debt. 
This  is  why  I  have  made  the  point  that  all  mediums 
should  be  a  legal  tender;  if  the  process  of  liquida- 
tion be  not  all  the  time  going  on,  sales  of  commodi- 
ties will  to  a  large  extent  cease  to  be  made ;  certainly 
credits  will  cease  to  be  given.  I  know  of  no  greater 
stimulus  to  exertion  than  the  desire  to  sustain 
credit.  The  wish  to  acquire  property  is  not  greater 
than  the  wish  to  liquidate  debt  promptly ;  many 
traders  have  little  other  capital  than  honor  and 
promptness,  and  hence  their  extraordinary  exer- 
tions to  compass  the  means  of  payment.  These 
parties  buy  on  time  and  sell  for  the  difference  over 
cost. 

This  position  of  the  seller  of  commodities  for  a 
liquidator  will  be  rendered  more  apparent  by  taking 
into  consideration  the  double  office  of  the  medium, 
— the  exchange  of  produce,  and  the  liquidation  of 
debt. 

The  gross  produce  of  the  country  is  over  $3,000,000, 
and  the  running  debt  nearly  $8,000,000;  at  least 
one-third  of  the  gross  products  are  consumed  at 
home  by  the  producer,  and  for  this,  of  course,  no 
medium  or  liquidator  is  required;  then  the$2, 000, 000 
must  be  exchanged  for  other  goods:  if  for  cash,  the 
medium  must  be  used;  if  on  time,  and  the  residue, 
with  all  the  multiplied  transactions  of  a  trading 
country,  calls  for  a  liquidator  or  means  of  payment, 
a  large  portion  of  these  credits  will  be  liquidated  by 
adverse  credits  and  set-offs  through  the  banks  of 
the  large  cities  and  centers  of  trade.  The  running 
balance  of  debt  must  be  paid  bv  the  medium  until 


TRUE  BASIS   OF  ALL   MEDIUMS. 


2or> 


the  real  credit  that  was  to  have  canceled  it  has  been 
found. 

To  elucidate  this  position  and  the  mode  of  can- 
celing debts  b}^  the  use  of  credits,  I  have  made  the 
following  clearing-house  statement  of  debits  and 
credits,  showiug  how  they  finally  balance  each  other  ; 
a  daily  repetition  of  this  goes  on  when  trade  is  brisk. 


To  receive. 

Creditor. 

Dubtor. 

To  pay. 

$500,000 
390,000 
210,000 
110,000 
90,000 
100,000 

United  States 

Europe 

South 

West 

North 

Other  countries 

$500,000 
400,000 
200,000 
100,000 
100,000 
100,000 

10,000 

10,000 
10,000 

10,000 

$20,000 

$1,400,000  ■ 

$1,400,000 

$20,000 

In  fact,  each  city,  town,  and  county  clears  its 
own  neighborhood  and  customers.  Valuing  on  the 
debtors  in  favor  of  the  creditors  to  close  up,  the 
last  debtor  will  be  found  to  have  more  goods  than 
he  can  hold  or  carry,  and  must  convert  in  order  to 
get  the  credits  with  which  to  liquidate.  I  beg  a 
careful  study  of  this  table  of  clearing  debts ;  by  its 
means  many  intricate  positions  may  be  clearly  un- 
derstood,— among  others,  how  fourteen  millions  of 
credits  will  pay  fourteen  millions  of  debits,  and, 
above  all,  how  little  of  money,  gold  or  bank-note  me- 
diums, enters  into  the  dail}-  transactions  of  great 

18 


206  SCIENCE   OF  MONEY. 

countries,  so  thoroughly  versed  in  the  hunting  up  of 
commodities  are  Europe  and  the  United  States.  In 
fact,  the  amount  of  gold  handled  in  payment  really 
plays  so  insignificant  a  part  in  the  canceling  of  debt 
or  the  purchase  of  commodities  that  we  are  forced 
to  the  conclusion  that  produce  alone  buys  produce 
and  liquidates  debt,  and  that  when  gold  is  called 
for  there  is  no  produce,  and  some  one  is  unable  to 
pay  his  debt,  from  a  failure  chargeable  to  some  ac- 
count, but  not  to  the  circulating  account  or  legal 
tender.  The  truth  is,  this  delinquent  debtor  has 
nothing  to  pay  for  the  liquidation  and  no  credit  to 
borrow ;  he  has  overtraded  or  mistaken  the  market 
and  sold  at  a  loss.  The  trouble  that  he  is  in  is  not 
chargeable  to  the  medium  or  to  derangement  of  its 
circulation.  If  legal  tenders  were  as  cheap  as  bank- 
rupt notes,  he  could  not  command  them.  He  must 
stand  back  and  let  those  come  forward  who  have 
commodities  for  exchange;  they  are  able  and  will- 
ing to  redeem  the  medium, — in  fact,  pay  it  or  con- 
vert it  into  gold  or  its  equivalent. 

From  the  foregoing  all  unbiased  parties  can  draw 
the  following  deduction,  which  I  call  a  fundamental 
truth  : 

If  a  country  require  $500,000,000  of  a  medium 
and  legal  tender,  and  no  more  than  that  sum  is 
given  them,  all  surplus  of  produce  and  goods  and 
all  debts  are  the  basis  of  the  fund  in  the  great  bank- 
ing-house for  the  redemption  on  demand  which  will 
cause  its  instant  convertibility  into  gold  or  any  other 
commodity.  No  basis  of  convertibility  ever  offered 
by  banks  of  circulation  can  be  as  effectual  as  the 


TRUE  BASIS    OF  ALL   MEDIUMS.  207 

conversion  in  full  at  all  points.  I  hold,  further,  that 
a  country  giving  circulation  to  its  medium,  and  de- 
claring it  a  legal  tender,  will  not  ask  for  immediate 
convertibility  into  gold,  but  will  trust  something  to 
the  fortunes  of  another  crop,  and  to  some  extent  will 
rely  on  Providence;  but  if  the  promise  of  converti- 
bility be  once  found  wanting  in  a  mixed  currency,  all 
faith  is  lost,  and  the  determination  springs  up  to 
realize  at  once. 

This  position  in  regard  to  the  fund  held  for  the 
redemption  and  immediate  conversion  of  our  incon- 
vertible medium,  paradoxical  as  it  may  seem,  ought 
to  be  clearly  understood;  and,  as  I  claim  originality 
for  it  (no  work  I  have  met  with  urging  this  point), 
I  deem  it  my  dut}7  to  explain  fully  the  surroundings. 
In  order  to  do  this,  I  will  go  to  the  root  of  con- 
vertibility, and  what  is  to  be  relied  on  in  the  hour 
of  need. 

Take  the  Bank  of  England.  What  is  the  basis  of 
her  notes?  When  issued  with  fifty  percent,  of  gold 
as  a  basis,  all  parties  know,  favorable  though  this 
basis  may  be,  that  immediate  conversion  would  be 
an  impossibility.  It  needs  no  great  amount  of 
arithmetical  knowledge  to  see  that  the  half  is  not 
equal  to  the  whole.  The  bank's  great  reliance  is 
on  the  ability  of  the  people  who  are  compelled  to 
use  a  medium.  Every  man  in  the  kingdom,  while 
the  bank  is  not  called  on  for  one  dollar  of  her  gold, 
is  converting  these  notes,  daily  paying  his  assets 
and  commodities  for  them.  So  long  as  this  is  the 
case,  the  bank  need  not  fear  being  called  upon  for 
immediate  conversion.    iSTow,  I  hold  that  the  United 


208  SCIENCE   OF  MONEY. 

States,  with  her  wide-spread  territory,  offers  greater 
security  for  tne  immediate  conversion  of  her  notes 
than  can  he  offered  by  any  other  country.  The 
mass  of  her  people  have  not  only  a  direct  interest  in 
upholding  these  notes,  but  are  compelled  to  use 
them  in  the  exchange  of  her  large  productions 
seeking  a  market.  They  cannot  be  much  below 
82,000,000,  which  is  offered  for  the  redemption  of 
$500,000.  If,  as  the  result  of  a  short  crop,  a  suffi- 
cient amount  is  not  placed  on  sale  to  cover  the 
demands  of  those  who  desire  immediate  conversion, 
and  the  tendency  should  be  a  decline  in  value  or 
purchasing  power,  still  the  necessity  for  the  liqui- 
dation of  debt  and  their  use  as  a  legal  tender  will 
sustain  them  until  increased  production  can  come 
to  their  aid. 

Can  there  be  any  more  effective  conversion  than 
the  products  which  man  is  compelled  to  have  for 
the  supply  of  his  daily  wants,  coupled  with  the 
power  and  certainty  of  liquidating  debt?  Fluctua- 
tions and  depreciation  may  occur  for  a  time,  but, 
in  the  face  of  the  large  tax-list,  cannot  last  long. 
The  people  will  be  poor  indeed  when  they  have 
no  goods  to  offer  in  redemption.  If  gold  be  desired 
by  the  timid  and  fhe  speculator,  it  will  still  have  to 
be  converted  into  goods  to  be  made  useful  or  pro- 
ductive; if  used  in  the  liquidation  of  debt,  it  has 
accomplished  nothing  more  than  mess-pork  or  flour 
can  do. 

In  a  word,  all  the  cotton,  mess-pork,  and  flour  in 
the  country  is  held  as  the  reserve  fund  to  bring 
immediate  conversion,  and  can  be  relied  on  in  the 


TRUE  BASIS    OF  ALL   MEDIUMS.  209 

payment  of  any  foreign  balance ;  they  will  do  all 
that  gold  can  do  in  sustaining  credit,  besides  giving 
employment  to  the  enterprising  trader  and  building 
up  a  virtuous  population.  Commodities  that  will 
bring  gold  into  a  country  are  the  equal  of  gold. 
After  all  that  can  be  said  in  favor  of  gold,  it  cannot 
be  commanded  if  the  products  offered  for  it  are  not 
more  desirable. 

There  is  nothing  unnatural  in  a  people  under- 
taking to  protect  the  credit  of  their  country  by  the 
redemption  or  conversion  of  her  notes.  It  is  often 
done  from  motives  of  friendship,  where  there  is  no 
direct  interest,  even  in  times  of  panics.  If  the  cor- 
respondent of  a  well-known  house  should  be  forced 
to  the  wall,  friends  will  step  forward  and  protest 
the  bills  on  account  of  the  drawer,  often  preventing 
wide-spread  disaster.  Now  that  all  large  commer- 
cial cities  are  connected  by  telegraph,  immediate 
provision  can  be  made  that  will  be  as  effectual  in 
payment  as  if  the  original  payer  had  honored  the 
drafts. 

The  same  principle  would  lead  the  people  of  this 
country  to  come  forward  and  redeem  the  notes  of 
the  government  with  their  commodities  and  use 
them  in  the  liquidation  of  debt.  The  necessity 
that  compels  them  to  use  these  notes  to-day  will,  in 
all  likelihood,  continue  at  least  while  they  are  pros- 
perous and  have  commodities  to  be  exchanged. 

The  disorganizer  and  speculator  for  a  rise  can 
make  a  corner  in  any  one  commodity,  especially 
gold,  if  a  legal  tender,  greatly  to  the  detriment  of 
the  debtor  class,  disturbing  the  relations  between 

IS*" 


210  SCIENCE   OF  MONEY. 

all  other  productions,  as  well  those  in  second  hands 
as  the  balance  in  the  hands  of  the  producer.  This 
cannot  be  the  case  to  any  ruinous  extent  if  we  have 
a  medium  such  as  has  been  indicated,  with  the  elas- 
ticity to  stretch,  and  which,  when  redundant,  will 
shrink  back  into  four  per  cent,  bonds,  until  new 
products  again  calf  it  into  use.  There  need  be  no 
fear  of  a  protracted  redundance  of  circulation;  the 
exchange  of  bonds,  and  vice  versa,  will  generally  be 
made  in  view  of  a  profit.  Interest  always  prompts 
man  to  seek  the  most  profitable  and  safe  invest- 
ments; for  this  reason,  above  all  others,  the  me- 
dium should  be  regulated  by  the  parties  using  it 
and  giving  it  currency. 

A  correct  appreciation  of  this  principle  will  ex- 
plain why  any  medium  has  currency.  After  all,  the 
proportion  of  gold  as  a  basis,  the  quick  circulator  and 
universal  credit,  springs  from  the  daily  redemption 
and  conversion  by  the  people  ;  they  are  satisfied  with 
this,  and  understand  its  complications.  Market  re- 
ports and  quotations  of  the  gold  market  are  not  half 
so  tempting  as  the  redemption  with  pork  and  flour 
and  the  payment  of  debts.  Those  who  redeem  in 
commodities  are  not  the  only  ones  that  show  a  dis- 
position to  sustain  the  medium.  The  professional 
man,  the  doctor,  the  lawyer,  and  the  minister,  are 
equally  the  advocates  of  a  daily  conversion. 

The  indebtedness  of  a  country  also  gives  credit 
by  daily  use ;  but  it  is  the  products  alone  from  which 
final  redemption  can  be  hoped  for.  The  two  pro- 
cesses, combined,  may  be  likened  to  Peleg  Bissel's 
churn,  which  was  composed  of  one  big  wheel  and 


TRUE  BASIS   OF  ALL   MEDIUMS.  211 

a  smasher.  Debt  is  the  big  wheel,  and  commodi- 
ties are  the  smasher;  one  stirs  up  the  fire,  the 
Other  extinguishes  it.  Without  the  big  wheel  and 
smasher  the  Bank  of  England  notes  would  cease  to 
circulate;  there  would  be  no  use  for  a  medium  if 
there  was  no  produce  to  redeem  them  instantly. 

When  banks  undertake  to  issue  their  orders  on 
the  people  for  commodities,  their  desire  to  make 
interest  and  speculate  on  credit  is  carried  to  such  an 
excess  that  the  people  cannot  respond.  Then  they 
are  returned  to  the  owners  for  payment;  and  panics 
ensue,  bringing  ruin  on  all  traders  who  may  have 
obligations  to  pay  outside  of  the  banks. 

If  the  people  of  a  country  desire  gold,  the  mer- 
chant will  bring  it  in  return  for  the  exports.     It  is 
rarely  that  the  trader  neglects  the  wants  of  his  cus- 
tomers ;  to  do  so  would  be  to  neglect  his  own  in- 
terest.    He  will  bring  the  gold  as  willingly  as  the 
bread  or  the  calico,  if  they  are  able  to  pay  for  it. 
When  gold  was  needed  as  a  medium,  money  inter- 
ests were  involved,  and  a  great  number  of  parties 
had  to  be  consulted.   From  a  reduction  of  the  usual 
bank-note   medium   and    heavy  discounts   on   bills 
against  the  exports,  the  market  was  frequently  over- 
traded, and  then  suddenly  ran  off  in  the  same  way. 
Allow  the  producer  to  order  in  return  for  his  ex- 
ports such  goods  and  wares  as  he  may  desire,  and  the 
market  will  be  as  regularly  supplied  as  it  is  now  with 
calico,  tin  pana,  and  pots.    If  the  banker  wants  gold, 
let  him  buy  commodities,  or  bills  against  them,  and 
import  it.     Do  not  force  the  producer  to  pay  all  the 
charges  of  bringing  it  into   the  country  when   he 


212  SCIENCE   OF  MONEY. 

may  want  none  of  it ;  his  wants  may  be  satisfied 
with  pork,  flour,  and  calico.  When  the  necessaries 
and  conveniences  of  life  are  needed,  man  will  ex- 
port the  luxuries  and  superfluities  in  exchange  for 
them.  Gold  being  the  least  useful  of  all  luxuries, 
it  is  but  natural  to  send  it  off  first  in  exchange 
for  the  necessaries  of  existence  and  reproduction. 
If  the  people  do  not  desire  gold,  and  we  have  our 
legal  tender,  they  can  prevent  its  import  by  ad- 
vancing prices  for  their  productions.  This  process 
will  establish  an  equilibrium  the  world  over. 


DEDUCTIONS. 


1.  If  the  medium  and  legal  tender  of  a  country 
be  merchandise,  like  gold,  desirable  for  export,  it  is 
a  curse,  in  place  of  a  blessing,  to  the  people. 

2.  All  mediums  are  conventional,  and  have  the 
value  of  the  goods  they  will  exchange  for;  legal 
tenders  are  made  so  by  law. 

3.  The  true  basis  of  all  mediums  for  conversion 
is  commodities.  No  proportion  of  gold  to  the 
amount  in  use  is  equal  to  the  instant  and  universal 
conversion  by  the  people  in  productions.  Couple 
this  with  the  power  of  a  legal  tender,  and  you  have 
a  medium  which,  if  restricted  to  the  wants  of  a 
people,  will  be  at  all  times  equal  to  gold.  Bank 
of  England  notes,  with  dollar  for  dollar  as  a  basis 
in  gold,  would  not  be  a  reliable  or  useful  medium, 
if  it  were  not  for  the  tacit  promise  on  the  part  of 


DEDUCTIONS.  213 

the  people  to  redeem  them  with  the  necessaries  and 
conveniences  of  life.  If  yon  convert  the  medium 
into  gold,  these  commodities  must  still  be  had, — 
one  is  as  effectual  as  the  other.  Commodities,  after 
all,  buy  each  other  and  liquidate  debt. 

4.  !STo  circulating  medium  that  is  not  a  legal 
tender  should  ever  be  permitted ;  otherwise,  when 
discredited,  it  deprives  man  of  the  ability  to  pay 
debts.    How  can  he  pay  without  products  or  value  ? 

5.  Imports  take  gold  out  of  the  country. 

6.  If  gold  is  the  legal  tender,  the  export  articles 
have  all  the  burden  to  bear  in  bringing  it  back. 

7.  The  amount  of  tax  paid  by  the  exports  to  keep 
up  a  legal  tender  and  sustain  bank  credits  is  five  per 
cent,  per  annum,  or  $25,000,000. 

8.  This  $25,000,000  is  a  bounty  to  foreign  manu- 
factories and  a  discrimination  against  the  home  pro- 
ductions by  the  cheapening  of  the  exchange,  and 
is  so  much  loss  to  the  producer. 

9.  Commodities  not  alongside  of  each  other  can- 
not measure  value  accurately ;  they  differ  in  differ- 
ent countries. 

10.  Gold  is  not  reliable  as  a  comparative  measure 
of  value.  Its  own  cost  fluctuates  ;  but-not  so  often 
or  so  disastrously  as  the  supply  at  any  particular 
place,  causing  its  value,  as  a  medium  or  legal 
tender,  to  rise  or  fall. 

11.  All  mediums  cost  the  country  the  average  rate 
of  interest.  The  lowest  estimate  on  $600,000,000 
at  six  per  cent,  is  $36,000,000. 

12.  The  people  that  redeem  and  give  currency  to 
the  medium  should  be  the  recipients  of  this  sum. 


214  SCIENCE   OF  MONEY. 

13.  Bills  of  exchange,  as  now  used,  are  the  pur- 
chasing power  and  medium  between  exports  and 
imports. 

14.  Exports  buy  and  pay  for  imports,  including 
gold. 

15.  Balance  of  trade  is  the  difference  between 
individual  speculations,  and  is  a  private  affair,  to 
be  adjusted  by  the  speculators  as  best  they  can. 

16.  Favorable  or  unfavorable  balance  of  exchange 
indicates  that  the  banks  issuing  notes  as  a  medium 
are  being  called  on  for  payment.  When  they  pay, 
the  balance  will  change. 

17.  Large  discounts  on  bills  at  an  export  point  are 
oftener  an  evidence  of  prosperity  than  of  poverty; 
they  are  an  indication  of  the  effort  to  realize  for 
productions.  When  gold  has  to  be  forwarded  to 
meet  the  bills,  it  is  an  evidence  of  a  scarcity  of 
commodities. 

18.  The  Bank  of  England  remained  suspended 
for  nearly  twenty-five  years;  and  yet  during  a  por- 
tion of  that  time  her  notes  bore  a  premium  over 
gold  as  high  as  three  per  cent. 

19.  Russia  issued,  forty  millions  of  irredeemable 
notes;  they*circulated  at  par  with  gold  for  seven- 
teen years,  and  did  not  decline  until  the  issues 
exceeded  the  demand  as  a  medium. 

20.  The  notes  of  the  Bank  of  Venice,  based  on  a 
loan  to  the  government  without  any  promise  to  pay 
in  gold,  commanded  a  premium  over  gold  of  thirty 
percent,  during  nearly  five  hundred  years,  and  the 
premium  had  finally  to  be  restricted  by  law  to 
twenty  per  cent. 


DEDUCTIONS  215 

21.  Our  present  legal -tender  medium,  if  per- 
petuated and  made  interchangeable  with  four  per 
cent,  bonds,  will  adjust  itself  to  the  volume  of  pro- 
ductions with  but  slight  fluctuations  from  a  gold 
standard. 

22.  Public  debt  is  based  entirely  on  the  surplus 
productions  of  the  country.  No  country  ever  gave 
its  lands  and  capital  stock  in  payment  of  debt;  to 
do  so  would  be  a  surrender  of  nationality.  The 
principal  and  interest,  therefore,  must  be  drawn 
from  surplus  income. 

23.  When  wealth  was  thought  to  consist  in  gold, 
Europe  legislated  up  to  1663  to  prohibit  the  export 
and  encourage  the  import.  It  was  instinct  endeav- 
oring to  keep  in  the  country  the  requisite  sum  as  a 
medium,  in  order  to  prevent  undue  fluctuations  in 
property  that  was  to  be  measured  by  it. 

24.  The  best  writers  on  political  economy  urge 
the  great  expense  of  gold  as  a  good  reason  for  the 
many  substitutes  and  devices  which  man  has  been 
compelled  to  use  in  the  exchange  of  commodities 
and  the  liquidation  of  debt. 


AA    000  590  448 


